Asian Currencies Weaken After China Says Manufacturing Shrank

By Kim Kyoungwha

Dec. 1 (Bloomberg) -- Asian currencies declined, led by Indonesia’s rupiah and Singapore’s dollar, as a record contraction in China’s manufacturing damped the outlook for the region’s economic growth.

Eight of the 10 most-actively traded Asian currencies outside Japan weakened after China said output, new orders and export orders fell the most on record and a Japanese report showed wages dropped for the first time this year. The rupiah slid for the first time in a week and the Singapore dollar slumped the most in a month.

“The grim manufacturing number is telling us China drags everybody down,” said Irene Cheung, a corporate director for local-markets trading at ABN Amro Bank NV in Singapore. “It’s the start of what will go even worse and set the bearish tone for Asian currencies.”

The rupiah declined 1.5 percent 12,285 per dollar as of 3:32 p.m. in Jakarta, according to data compiled by Bloomberg. It has lost 25.6 percent since the end of June, the worst performance in Asia after the Korean won. The Singapore dollar weakened 1.1 percent to S$1.5253 to the dollar.

The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e-mailed statement. China’s economy is deteriorating more quickly than the nation’s top planning agency expected, National Development and Reform Commission Chairman Zhang Ping said last week.

Korea’s exports fell the most in almost seven years in November as shipments to China and the U.S. slumped, a government report showed today. Singapore’s trade ministry on Nov. 21 cut the nation’s growth forecast for a fourth time this year to 2.5 percent and forecast the economy may shrink in 2009.

Korean Exports

The yen rose against the dollar and the euro before U.S. reports this week that may show manufacturing contracted and employers cut jobs by the most since 2001.

The yen strengthened to 94.69 per dollar in Tokyo from 95.52 in New York on Nov. 28. It climbed to 119.75 versus the euro from 121.22 at the end of last week.

China’s yuan fell to a four-month low after the central bank set the reference rate at the weakest since August, signaling it may want to weaken the currency to spur growth.

The yuan dropped 0.68 percent to 6.8815 a dollar, according to the China Foreign Exchange Trade System. Taiwan’s dollar weakened 0.2 percent to NT$33.350, according to Taipei Forex Inc.

‘Steep Decline’

“For Taiwan, what matters is the PMI that came out of China for November, which showed a steep decline,” said Dariusz Kowalczyk, a strategist at CFC Seymour Ltd. in Hong Kong. “There is a major contraction going on in Chinese manufacturing.”

Malaysia’s ringgit extended a four-month slide after the central bank said last week economic growth slowed to 4.7 percent in the three months to Sept. 30, the least in three years. Shipments abroad may have increased at the slowest pace since March, according to a Bloomberg News survey before a report on Dec. 4.

“Global economic deceleration is going to hit Malaysia and the correction in commodity prices will cap the value of exports,” said Sebastien Barbe, a strategist at Calyon in Hong Kong. “Asia-ex Japan currencies, with the exception of the Hong Kong dollar and Chinese yuan, will have to adjust lower.”

The ringgit fell 0.3 percent to 3.6295 per dollar, adding to a 10 percent loss since the end of July. The ringgit will weaken to 3.90 to the dollar by June next year as economic growth slows to zero in 2009, Barbe said.

South Korea’s won rose for a fifth day, erasing a loss, as global investors bought more of the nation’s shares than they sold for a fourth day, increasing demand for the local currency.

The won strengthened 2 percent to 1,440 per dollar, according to Seoul Money Brokerage Services Ltd. It fell as low as 1,478 in early trading.

Elsewhere, the Thai baht fell 0.7 percent to 35.75 versus the dollar. The Vietnamese dong was little changed at 16,972.50. Philippine financial markets were shut today for a holiday.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.