By Kim Kyoungwha and David Yong
Jan. 29 (Bloomberg) -- Indonesia’s rupiah and Malaysia’s ringgit led a decline in Asian currencies on speculation demand for emerging-market assets will wane as a global recession fans risk aversion.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, extended this month’s loss after Japan reported the biggest drop in retail sales in almost four years and the International Monetary Fund forecast the world economy will expand at the slowest pace since World War II. The ringgit has lost 4 percent so far in January, set for its worst start to a year since 1998.
“Economic data will continue to be weak for another few months and investment appetite won’t be coming back so quickly,” said Ho Woei Chen, an economist at United Overseas Bank Ltd., Singapore’s second-largest bank by assets. “This will be negative for Asian currencies.”
The Asia Dollar Index fell 0.3 percent to 105.21 as of 5:45 p.m. in Singapore. The ringgit slid 0.3 percent to 3.5980 versus the greenback, the rupiah dropped 0.5 percent to 11,315 and the Philippine peso declined 0.6 percent to 47.195.
Retail sales in Japan, the world’s second-largest economy, fell 2.7 percent from a year earlier in December, the government reported today in Tokyo. Confidence among South Korean manufacturers is near a record low, according to the findings of a Bank of Korea survey published today in Seoul.
The IMF yesterday cut its 2009 global economic growth projection to 0.5 percent, from a November estimate of 2.2 percent. U.S. gross domestic product will contract 1.6 percent, Japan’s will shrink 2.6 percent and the euro area will decline 2 percent in 2009, it forecast.
Fed Bond Purchases
The yen rose from a one-week low against the dollar as U.S. stock futures fell and Japanese shares pared gains, fueling speculation investors will favor the currency as a haven from the credit crisis.
Japan’s currency advanced to 90.14 per dollar from 90.26 in New York late yesterday, when it dropped 1.4 percent.
Malaysia’s ringgit touched a seven-week low of 3.6280 per dollar yesterday, according to data compiled by Bloomberg. The nation’s economy probably shrank in the final quarter of 2008 amid a slump in commodity prices and exports, UOB’s Ho said.
Crude oil recently traded at $41.68 a barrel in New York, less than half last year’s average price of $99.75, while palm oil fetched 1,790 ringgit ($497) a ton, down from 2,852 ringgit in 2008, according to Bloomberg data. The two products last year accounted for 14 percent of Malaysian exports, which in November dropped the most in almost seven years.
Capital Outflows
Indonesia’s rupiah yesterday reached a six-week low of 11,455 per dollar. Overseas investors have sold a net $126 million worth of the nation’s equities this year, contributing to a 2.3 percent decline in the benchmark Jakarta Composite Index.
“The rupiah is more sensitive to risk aversion than other Asian currencies and there are continual capital outflows,” according to Nizam Idris, a currency strategist at UBS AG in Singapore.
The Philippine peso fell for the first time in four days as the central bank lowered borrowing costs for the second time in six weeks to shore up economic growth, which the government today said slowed to 4.5 percent in the fourth quarter from 5 percent in the third. Bangko Sentral ng Pilipinas cut its benchmark interest rate by half a percentage point to 5 percent, a decision predicted by nine of 13 economists surveyed by Bloomberg News.
Won Retreat
South Korea’s won fell, retreating from a one-week high, on concern tighter credit markets and sliding exports will starve the nation’s banks and companies of foreign exchange.
The currency, Asia’s worst performer last year, extended this month’s loss to 8.6 percent, the biggest drop among the 10 most-active regional currencies outside Japan.
“There was a rush of dollar buying by banks towards the close, causing a reversal in the won’s rise,” said Sam Hong, a Seoul-based foreign exchange dealer with Shinhan Bank.
The won slid 0.2 percent to 1,378.50 per dollar, after earlier climbing as high as 1,360, according to Seoul Money Brokerage Services Ltd.
Elsewhere, the Singapore dollar fell 0.4 percent to S$1.5062 versus the greenback and the Thai baht slid 0.1 percent to 34.91. Financial markets in China, Taiwan and Vietnam are closed all of this week for the Lunar New Year holiday.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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