Asian Currencies Decline, Led by Korean Won, on Risk Aversion

By Judy Chen

Feb. 11 (Bloomberg) -- Asian currencies declined, led by South Korea’s won, on speculation that the U.S. bank rescue plan will fail to end the global financial crisis, sapping demand for emerging-market investments.

The Malaysian ringgit, the Philippine peso and the Taiwan dollar also dropped against the greenback after the Standard & Poor’s 500 Index of U.S. equities slipped by the most in three weeks. The Korean currency weakened to the lowest in two months, extending this year’s loss to 10 percent, as the Kospi index tumbled 2.6 percent.

“Asian currencies will be under pressure against the U.S. dollar given a sharp increase in safe-haven demand following the disappointment in the equity market,” said Sean Callow, a Sydney-based currency strategist at Westpac Banking Corp., Australia’s biggest lender by market value.

The won slid as much as 2.6 percent to 1,420, the weakest since Dec. 10, before trading at 1,399.10 per dollar as of 10:03 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Malaysia ringgit dropped 0.6 percent to 3.6098. The Philippine peso declined 0.3 percent to 47.025 and the Taiwan dollar fell 0.1 percent to 34.035.

The S&P 500 Index dropped 4.9 percent as investors expressed concern about a lack of specifics on plans for addressing the distressed assets choking banks’ balance sheets.

Malaysian Ringgit

The Malaysian ringgit headed for the biggest drop in three weeks as economists forecast manufacturers idled more factories as exports extended a slump into December because economies contracted in Singapore, the U.S. and Japan.

Industrial production fell for a fourth month in December by 10.7 percent from a year earlier, the most since at least 2002, according to a Bloomberg News survey before a statistics department report at 12:01 p.m. in Kuala Lumpur today.

The trade ministry may say tomorrow exports declined for a third month by 9 percent in December, the biggest drop since February 2002, a separate survey showed.

“The weakness in production is the slump in external demand and we don’t expect demand in the U.S. to come back until the fourth quarter,” said Nikhilesh Bhattacharyya, an economist in Sydney at Moody’s Economy.com. “Emerging-market currencies can still depreciate until we see some kind of traction in economic recovery.”

To contact the reporter on this story: Judy Chen in Shanghai at xchen45@bloomberg.net;