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

By Kim Kyoungwha and David Yong

Jan. 15 (Bloomberg) -- Asian currencies fell, with the Korean won, Malaysian ringgit and Taiwan dollar all reaching one-month lows, as a deepening global recession prompted investors to favor safer bets than emerging-market assets.

Seven of Asia’s 10 most-active currencies excluding the yen declined versus the greenback and stocks tumbled across the region after reports showed U.S. retail sales dropped for a sixth month and Japanese machinery orders plunged the most on record. 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 1.6 percent to 1,369.75 per dollar as of 1:45 p.m. in Seoul. The ringgit dropped 0.6 percent to 3.5925 and the Taiwan dollar weakened 0.2 percent to NT$33.325. Indonesia’s rupiah declined 0.9 percent to 11,173 and the Philippine peso declined 0.4 percent to 47.30.

U.S. retail sales fell 2.7 percent in December and Japan’s machinery orders the previous month dropped 16 percent, according to figures released since yesterday’s close of trading in Asian financial markets. Economists forecast the declines would be no more than half those levels, according to the median estimates in Bloomberg News surveys.

Stronger Yen

The yen strengthened on speculation the deteriorating outlook for the world economy and slides in global stocks will prompt investors to repay Japanese loans that were taken out to buy higher-yielding assets overseas. Japan’s benchmark interest rate of 0.1 percent compares with 4.25 percent in Australia.

The yen rose 0.2 percent to 88.86 per dollar from late yesterday in New York. It also climbed 0.4 percent versus the euro and 0.7 percent against the Australian dollar. The MSCI Asia Pacific Index of regional shares fell 4 percent, headed for its lowest close since Dec. 8, following a 3.4 percent decline in the Standard & Poor’s 500 Index of U.S. equities.

“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.”

South Korea’s economic growth this year is likely to be less than the 2 percent forecast by the Bank of Korea in December, Vice Finance Minister Bae said in Seoul today. The finance ministry last month predicted expansion would slow to 3 percent from an estimated 3.6 percent in 2008.

Recessions

The ringgit reached 3.5953, 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 ending March 31, pushing it into a technical recession, Citigroup Inc. said this week. The nation’s three biggest export markets -- Singapore, the U.S. and Japan -- are already in recessions.

“While most of the bad news is already out, it doesn’t mean that emerging markets cannot continue to sell off,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur.

Overseas investors have sold a net $518 million worth of Taiwan equities this month, dumping $102 million yesterday alone, according to data compiled by Bloomberg. The island’s currency today reached NT$33.355 against the greenback, the weakest since Dec. 12.

‘Sustained Pressure’

“There will be sustained pressure on the Taiwan dollar from the stock selling, which will probably continue over the next few days,” said Joseph Lau, a Hong Kong-based economist at Credit Suisse Group AG.

Taiwan’s exports fell by a record 42 percent in December and government estimates suggest the economy slipped into a recession in the fourth quarter. The deterioration in overseas sales will persist for at least the next six months, giving the authorities an incentive to keep the local currency on a weak bias, Lau said.

Elsewhere, the Singapore dollar fell 0.7 percent to a one- month low of S$1.4978 against the greenback, before trading at S$1.4968. The Thai baht, China’s yuan and Hong Kong’s dollar were all little changed at 34.91, 6.8369 and 7.7566, respectively.

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