Asian Currencies Drop as U.S. Jobs Slump Erodes Export Demand

By Lilian Karunungan and Kim Kyoungwha

Jan. 8 (Bloomberg) -- Asian currencies fell, led by the South Korean won and the Indonesian rupiah, on speculation a slumping U.S. labor market will erode demand for exports and spoil returns on the region’s assets.

The won, Asia’s worst performer of 2008, weakened as foreign investors sold more Korean shares than they bought for the first time in seven days. The rupiah fell, snapping a three- day gain, as global equities declined following a private report that showed U.S. job losses increased in December. The ringgit slid to a three-week low before a report that will probably show slumping Malaysian manufacturing.

“Risk aversion is picking up again,” said Nizam Idris, a currency strategist in Singapore at UBS AG, the world’s second- largest currency trader. “The market is concerned about the economy again. Under this sort of environment, Asian currencies will weaken.”

The won, which lost 26 percent last year, fell 3 percent to 1,333 per dollar as of the 3 p.m. local close, according to Seoul Money Brokerage Services Ltd. The rupiah dropped 1.5 percent to 10,960, Malaysia’s ringgit declined 1 percent to 3.5375 per dollar, and Taiwan’s dollar slid 0.4 percent to NT$33.115.

“People are waking up to reality,” said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. “Sentiment had been buoyed by expectations the new year would be different.”

Growth Forecasts

South Korea’s economy may shrink in the first half of 2009 amid a slowdown in exports, rising unemployment and frail consumption, President Lee Myung Bak said last month. It probably contracted in the last quarter of 2008 for the first time in five years, the central bank said.

The won will slide to 1,425 per dollar this quarter, according to the median forecast of analysts surveyed by Bloomberg News. The rupiah will drop to 12,500, a separate survey shows.

Overseas investors sold more Indonesian shares than they bought yesterday for the first time this week, according to stock exchange data.

The yen advanced for a second day against the dollar after rockets fired from Lebanon struck northern Israel, prompting investors to seek the perceived safety of Japanese assets. The Japanese currency rose to 91.67 per dollar in London from 92.65 late yesterday in New York. Against the euro, it strengthened to 124.26 from 126.42. The euro was at $1.3576 from $1.3644.

Asian Outlook

The MSCI Asia Pacific Index of regional stocks declined 3 percent after ADP Employer Services said U.S. payrolls shrank by 693,000 jobs in December, the most since records began in 2001. Satyam Computer Services Ltd., India’s fourth-largest software- services provider, slumped 78 percent yesterday after Chairman Ramalinga Raju said he had falsified earnings over several years.

“Asia’s macroeconomic and currency outlook is a bit negative in the short term because we still expect bad U.S. payrolls to continue,” said Hideki Hayashi, chief economist in Tokyo at Shinko Securities Co. “India’s stock scandal will hamper any recovery in overseas investor confidence.”

Malaysia’s industrial production fell 6.5 percent in November from a year earlier, according to a Bloomberg News survey of economists before a government report tomorrow. That would be the biggest loss since December 2004. Exports slumped 4.9 percent in November, according to data released yesterday.

The Taiwan dollar weakened after the government reported exports dropped the most on record in December and the central bank cut interest rates for the sixth time since September.

Overseas sales, equivalent to about three-quarters of Taiwan’s economy, tumbled 42 percent in December from a year earlier. Following the release, the Central Bank of the Republic of China (Taiwan) lowered the discount rate on 10-day loans to banks to 1.5 percent from 2 percent.

“The export numbers were shockingly weak,” said Mitul Kotecha, Hong Kong-based head of global currency strategy at Calyon, the investment-banking unit of French bank Credit Agricole SA. “In an environment where exports are under significant pressure, the authorities will be content to see some depreciation, as long as it’s not a rapid fall.”

Elsewhere, the Singapore dollar dropped 0.8 percent to S$1.4840. The Thai baht fell 0.4 percent to 34.95 and the Vietnamese dong was at 17,474.50 from 17,480.00 yesterday.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.