Rupiah Leads Drop in Asian Currencies on Mounting Economy Woes

By Kim Kyoungwha and Lilian Karunungan

Jan. 12 (Bloomberg) -- Asian currencies weakened, led by Indonesia’s rupiah, Malaysia’s ringgit and the South Korean won, on mounting concern the global slowdown will reduce demand for the region’s exports and hurt economic growth.

All 10 of the most-traded Asian currencies fell after the U.S. jobless rate rose to the highest in almost 16 years in December, sending stocks around the world lower. The won slid for a third day after the Hankyoreh newspaper reported, citing a senior Bank of Korea official it didn’t identify, that the economy shrank more than 4 percent in the final quarter of 2008.

“The market is pricing in the possibility of a deeper recession than was previously expected,” said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. “It’s anybody’s guess how long a bear-market rally in stocks will be sustained.”

The rupiah dropped 2.2 percent to 11,200 against the dollar as of 2:57 p.m. in Jakarta and the ringgit lost 0.8 percent to 3.5700, according to data compiled by Bloomberg. The won fell 1.2 percent to 1,359, the weakest close since Dec. 15, according to Seoul Money Brokerage Services Ltd.

The MSCI AC Asia Pacific excluding Japan Index of stocks fell 2.9 percent in Hong Kong, after U.S. employers slashed payrolls in 2008 by the most since 1945.

The U.S. lost 524,000 jobs in December, bringing the total drop for last year to 2.589 million, just shy of the 2.75 million decline at the end of World War II, the Labor Department reported on Jan. 9 in Washington. The unemployment rate climbed to 7.2 percent in December from 6.8 percent a month earlier.

‘Risk Aversion’

The yen rose to a one-month high against the euro as traders raised bets that the European Central Bank will cut interest rates to the lowest since 2005 at its Jan. 15 meeting.

The Japanese currency gained to 90.10 per dollar from 90.39 late in New York on Jan. 9. Against the euro, the yen climbed to 120.94 from 121.81.

The ringgit weakened 0.8 percent to 3.5700 per dollar in Kuala Lumpur. Malaysian exports and factory output extended a decline in November, reports showed last week.

“We have quite high risk aversion right now again,” said Magnus Prim, Singapore-based Asia chief strategist at Skandinaviska Enskilda Banken. “You continue to see weak data coming out on the global front. There is definitely more room for ringgit weakness.”

The currency, which reached 3.5750, the lowest since Dec. 15, may weakened beyond 3.60 within the month, Prim forecast.

‘Remittances Slow’

The Philippine peso dropped to its lowest level this year on speculation remittances fell after the year-end holidays and companies took advantage of last month’s rally to accumulate dollars to pay for imports.

“Remittance flows have slowed down,” said Antonio Espedido, treasurer at China Banking Corp. in Manila. “After the major appreciation of the peso, corporates will start looking at covering their foreign-exchange requirements for the year.”

The peso also fell on speculation the passage of a U.S. economic stimulus plan will be delayed by congressional debate. President-elect Barack Obama is making “significant” changes to his proposal after members of his party said elements of the plan were inadequate, lawmakers said.

The currency declined 0.8 percent to 47.525 per dollar in Manila, according to Tullett Prebon Plc. The peso climbed 3 percent in December and 2.3 percent in the first three days of last week, as overseas nationals boosted remittances to fund holiday spending at home. Remittances usually drop in January after peaking in December.

Yuan Appreciation

China’s yuan was little changed at 6.8361 against the dollar on speculation a slide in exports will deter the central bank from allowing more gains in the currency.

Obama should press China to allow the yuan to appreciate because weakness in the currency is hurting U.S. jobs and manufacturing, according to Professor Peter Morici.

The U.S. dollar is “too strong” against the yuan, yen and other Asian currencies, Morici, from the University of Maryland’s Robert H. Smith School of Business, said in a commentary posted on the Web site of the Kiplinger Business Resource Center.

U.S. Treasury Secretary Henry Paulson and other U.S. lawmakers have urged China to loosen controls on the yuan exchange rate. They say the currency is undervalued, which gives an unfair trade advantage to manufacturers in the Asian nation.

‘Wholesale Destruction’

“The Chinese government intervenes in foreign-exchange markets to suppress the value of the yuan to gain competitive advantages for Chinese exports, and the yuan sets the pattern for other Asian currencies,” said Morici, former chief economist at the U.S. International Trade Commission. “Obama must get behind a policy to reverse the trade imbalance with China or preside over the wholesale destruction of many more U.S. manufacturing jobs.”

Taiwan’s dollar slid for a fourth day, the longest losing streak in a month, after overseas investors sold more Taiwan shares than they bought on each of the last three trading days.

Taiwan’s dollar dropped 0.2 percent to NT$33.235, according to Taipei Forex Inc. Elsewhere, the Thai baht fell 0.4 percent to 34.93 per U.S. dollar and the Singapore dollar declined 0.6 percent to S$1.4876.

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