Asian Currencies: Won, Peso Lead Drop on Recession, Stock Slide

By David Yong

Dec. 2 (Bloomberg) -- South Korea’s won declined, leading Asian currencies lower, on concern a deepening global recession will prompt investors to sell regional assets.

The won fell the most in a week as overseas investors sold more local shares than they bought for the first time in five days, according to Korea Exchange Inc. The Philippine peso and Taiwan’s dollar weakened as Asian stocks slid after reports yesterday showed manufacturing gauges fell to record lows in China, the U.K. and Russia. The U.S. economy, the world’s largest, entered a recession in December 2007, the National Bureau of Economic Research said yesterday.

“The tumble in stocks set a bearish tone for the won,” said Lee Myung Hoon, a currency dealer at Industrial Bank of Korea in Seoul. “Recent foreign buying failed to create a pattern that could lend support to the currency market and they have now turned to net selling.”

The won declined 0.8 percent to 1,451.75 against the dollar as of 12:10 p.m. local time, according to Seoul Money Brokerage Services Ltd., extending this year’s losses to 36 percent. Taiwan’s dollar slipped 0.4 percent to NT$33.48 and the peso weakened 1.1 percent to 49.48.

The won, Asia’s worst performer this year, also ended five days of gains after the Bank of Korea said today the economy expanded 0.5 percent in the third quarter, the slowest pace since 2004, because of weaker exports and domestic demand. Growth was previously estimated to be 0.6 percent.

Currency Forwards

Traders are betting the won will still advance to 1,439.60 per dollar in three months and to 1,433.30 in six months, according to non-deliverable forwards contracts. Forwards are agreements in which assets are bought and sold at current prices for delivery at a specified future date.

The yen fell 0.4 percent to 93.58 against the dollar, retreating from a five-week high, on speculation Japanese importers are buying foreign currencies to meet their year-end funding needs.

Japan’s currency also declined to 118.26 per euro from 117.52 yesterday, before the Bank of Japan holds an emergency meeting today to consider ways to help companies obtain funds after the world’s second-largest economy fell into a recession.

Seven of the 10 most-traded currencies in Asia outside Japan dropped today on concern exports are dwindling after the region’s biggest markets, including the U.S., Japan, and Europe, fell into a recession.

Taiwan Dollar

Taiwan’s dollar fell as Taiwan Semiconductor Manufacturing Co., the largest maker of chips designed by other companies, slid by the daily limit in Taipei after cutting its profit and sales forecasts for this quarter. The Taiex stock index fell 3.9 percent.

“The stock exchange is heavily skewed toward corporates with large export components,” said Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong. “There will be concern about capital outflows if we continue to see local corporates coming under pressure. There’s got to be some sort of managed depreciation in the currency.”

The Malaysian ringgit fell 0.2 percent to 3.6367 per dollar, after touching a two-year low of 3.6455, according to data compiled by Bloomberg. Indonesia’s rupiah lost 2.1 percent to 12,360 per dollar.

Malaysia’s exports may have grown 6.3 percent in October, the least since March, according to a Bloomberg survey of economists before a trade ministry report in two days. Slowing exports dragged down economic growth in the third quarter to the least in three years, the central bank said Nov. 28.

“Negative indicators are going to pull Asian currencies down,” said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. “It’s worrying for the ringgit if this trend persists.”

Elsewhere, Thailand’s baht declined 0.2 percent to 35.75 versus the U.S. currency and the Singapore dollar was little changed at S$1.5279 from S$1.5280. The Chinese yuan traded at 6.8885 from 6.8848 and the Vietnamese dong was little changed at 16,977 per dollar.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.