By Lilian Karunungan and David Yong
Jan. 6 (Bloomberg) -- Thailand’s baht and the Malaysian ringgit fell to three-week lows on concern deepening recessions in the world’s major economies will sap demand for regional assets.
The baht, which dropped 15 percent last year, the most since 1997, extended losses after Prime Minister Abhisit Vejjajiva said the central bank expects the economy to grow between 0.5 percent and 2.5 percent in 2009, the least since 1998. The ringgit declined for a third day against the dollar on speculation the escalating war between Israel and Hamas, and rising oil prices, will increase demand for the U.S. currency.
“The market reflects demand for safe-haven assets due to the prolonged crisis, and to a smaller extent, the weak economic data,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur.
The baht dropped 0.5 percent to 35.10 per dollar, the weakest since Dec. 12, before trading at 35.03 as of 11:30 a.m. in Bangkok, according to data compiled by Bloomberg. The ringgit weakened 0.1 percent to 3.5010 in Kuala Lumpur. It earlier reached 3.5138, the lowest since Dec. 18.
Thailand’s Finance Minister Korn Chatikavanij yesterday said the benchmark interest rate may be reduced further. The Bank of Thailand will continue “easing monetary policy” and will work closely with the government to stimulate economic growth, Prime Minister Abhisit said yesterday.
Policy Easing
The central bank last month cut its one-day bond repurchase rate by one percentage point to 2.75 percent. Thai policy makers next meet Jan. 14 to decide on borrowing costs.
The nation’s inflation slowed to a six-year low in December. Consumer prices increased 0.4 percent from a year earlier, after rising 2.2 percent in November, the Commerce Ministry said. Exports in November shrank 18 percent from a year earlier, the first contraction since March 2002, official figures show.
“The issue is whether there will be any policy paralysis,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “The prescription would be for rapid action from the government and monetary authorities. Slowing growth is weighing on the currency. The inherent risk is for further dollar upside.”
Weaker Euro
The baht will trade between 34.50 and 35.30 this month, Ng said.
The euro fell against the yen and traded near a three-week low versus the dollar before European Union data that will probably show slowing inflation, giving the European Central Bank more room to lower interest rates.
The euro declined to 126.27 yen in Tokyo from 127.31 yen late yesterday in New York. The euro traded at $1.3574 from $1.3635 yesterday, when it touched $1.3547, the lowest level since Dec. 15. The dollar was at 92.97 yen from 93.44 yen. It rose yesterday to 93.60 yen, the highest level since Dec. 8.
Malaysia’s ringgit had its longest stretch of losses today since the beginning of December before a government report tomorrow that economists estimate will show exports slumped in November by the most since February 2002.
Exports declined 5.7 percent in November from a year earlier, according to the median estimate in a Bloomberg News survey of economists. They slipped 2.6 percent in October, the first contraction since July 2007.
Malaysian Assets
Foreign investors reduced their holdings of ringgit- denominated bills and bonds for a sixth straight month in October from a record amount in April, according to the latest Bank Negara Malaysia statistics issued in December.
“Data out of Asia highlight the trend of falling inflation, slowing growth and deteriorating external accounts, which we view as negative for regional currencies,” Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., said in a research note. “Policy makers may not want to see significantly stronger currencies for the time being.”
The Philippine peso, which declined 13 percent last year, rose after central bank Governor Amando Tetangco signaled more scope to cut borrowing costs.
“The market is hoping that the central bank will lower rates further,” said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. “Still, the situation in the Middle East is raising fears that oil prices will spike and threaten inflation again.”
The currency climbed 0.4 percent to 46.943 in Manila, according to Tullett Prebon Plc.
Other Asian Currencies
The inflation rate in December slowed to a nine-month low of 8 percent, according to government figures released today in Manila compared with the median estimate of 8.8 percent in a Bloomberg survey.
“As inflation risks, particularly from food and fuel prices continue to recede, we will carefully consider opportunities for monetary easing, mindful of potential tightening in financial conditions,” Governor Tetangco said in a mobile phone message today.
The central bank cut its benchmark overnight borrowing rate by a half-point last month to 5.5 percent, the first reduction in 11 months. The next policy meeting will be on Jan. 29.
Elsewhere, the South Korean won was little changed at 1,315.05 per U.S. currency. Taiwan’s dollar fell 0.1 percent to NT$33.044. Singapore’s currency traded at S$1.4697 versus S$1.4706 yesterday. The Indonesian rupiah rose to 11,020 from 11,100. Vietnam’s dong was at 17,479 from 17,476.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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