Asian Currencies Drop, Led by Won, Rupiah, on Global Slowdown

By Kim Kyoungwha and David Yong

Jan. 15 (Bloomberg) -- Asian currencies fell, led by South Korea’s won and Indonesia’s rupiah, as regional stocks dropped and reports showed the global economic slowdown is deepening.

The Malaysian ringgit and the Taiwan dollar also weakened after reports showed a slump in U.S. retail sales and Japanese machinery orders, signaling a worsening recession in the world’s two-biggest economies. South Korea’s currency snapped a two-day gain after Vice Finance Minister Bae Kook Hwan said 2009 growth is likely to fall short of central bank predictions.

“We haven’t seen the worst reports yet, they’re accumulating,” said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking Corp. in Manila. “That’s what’s driving the fear.”

The won fell 1.3 percent to 1,365 per dollar as of 10:49 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 7.7 percent this month, the worst among the 10 most-traded Asian currencies outside of Japan. The rupiah declined 1 percent to 11,188, the ringgit dropped 0.7 percent to 3.5938 per dollar and the Taiwan dollar weakened 0.2 percent to NT$33.32. The peso declined 0.5 percent to 47.33.

The MSCI Asia Pacific Index of regional shares fell to a one-month low. Korea’s Kospi index of shares dropped 3.9 percent today, the most since Dec. 12, following a decline in U.S. equities. The Philippine Stock Exchange Index slid 1.9 percent.

Flight to Quality

“A tumble on Wall Street is unnerving investors globally again, spurring sentiment for a flight to quality,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “Demand for dollars is seen intensifying further.”

Gross domestic product growth this year is likely to be less than the 2 percent forecast by Bank of Korea, Bae said in notes for a speech to be delivered to businesses in Seoul today.

The ringgit reached 3.5945, the lowest since Dec. 11, and is down 3.9 percent so far this year. Malaysia’s economy will contract for a second quarter in the three months to March 31, pushing it into a technical recession, Citigroup Inc. said this week. The economy last slipped into a recession in the final quarter of 1998.

“Any news that impacts Malaysia’s export outlook will have a bearing on the ringgit,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur. “While most of the bad news is already out, it doesn’t mean that emerging markets cannot continue to sell off.”

Malaysia’s exports slumped 4.9 percent in November. Singapore, the U.S. and Japan, which together accounted for 38 percent of Malaysia’s overseas sales in 2008, are all in the midst of recessions.

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