Asia Currencies: Korea Won, Taiwan Dollar Lead Weekly Declines

By Lilian Karunungan

Feb. 20 (Bloomberg) -- Asian currencies headed for their biggest weekly drop in three months, led by South Korea’s won and Taiwan’s dollar, on concern tumbling exports will drag more of the region’s economies into recession.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, slid to its lowest since Dec. 2. The won dropped below 1,500 per dollar for the first time since November and Taiwan’s currency sank to a five-year low. Reports this week showed Singapore’s exports fell the most in at least 22 years and Taiwan’s economy shrank at the fastest pace on record.

“We have seen some liquidity crunch in the U.S. dollar,” said Tetsuo Yoshikoshi, senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “The economies in this region have been weakening quite sharply. That is the basic reason why Asian currencies are quite weak.”

The won declined 1.4 percent to 1,502.60 per dollar as of 11:38 a.m. in Seoul, headed for a weekly drop of 6.5 percent, according to Seoul Money Brokerage Services Ltd. Taiwan’s dollar slid 0.3 percent to NT$34.775, dropping for the 12th day in a row. It earlier touched NT$34.776, the lowest level since May 2003.

The Malaysian ringgit reached a two-year low of 3.6680 per dollar before trading 0.5 percent lower at 3.6690. Citigroup Inc. forecast the currency will slide as low as 3.8 by June, the level it was pegged at for about seven years before a fixed exchange rate ended in July 2005.

Recessions

Singapore’s non-oil domestic exports dropped 35 percent from a year earlier in January, while Taiwan’s economy shrank 8.4 percent in the fourth quarter of 2008, official figures show. Both economies, along with Japan, the U.S. and Europe, are in recession. South Korea’s economy, which shrank the most in a decade in the last quarter, is deteriorating, Finance Minister Yoon Jeung Hyun said Feb. 18.

The won has plunged 16 percent so far this year, making it the worst performer among the 10 most-traded Asian currencies outside Japan. None of the currencies has gained.

“The won has come under pressure with concerns about dollar funding in Korea and repaying of short-term debt,” said Callum Henderson, head of global currency strategy at Standard Chartered Plc in Singapore. “There’s a significant amount of short-term debt coming due, but compared to the fourth quarter last year, it’ll be less of a problem this time around.”

South Korean banks’ demand for dollars is decreasing as foreign-currency debt maturing every month this year is at least 50 percent lower than in the fourth quarter, the central bank said this week.

Elsewhere, the Indonesian rupiah slumped 0.7 percent to 12,065 per dollar, set for a 2.5 percent weekly loss. The Philippine peso and the Thai baht both dropped 0.5 percent, to 48.185 and 35.74, respectively. Vietnam’s dong was little changed at 17,482.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.