Asian Currencies Drop, Led by Baht, on Risk Aversion, Exports

By Bob Chen and Patricia Lui

Feb. 26 (Bloomberg) -- Asian currencies fell, with the Thai baht and Singapore’s dollar leading losses on concern prolonged turmoil in global financial markets will deepen the economic slump and delay a recovery in the region’s exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, approached a three-month low. The U.S. Treasury yesterday said America’s 19 biggest banks have six months to raise new capital after a mandatory review of their balance sheets, or they must accept taxpayer money on government conditions. Singapore said today its economy shrank the most in at least 33 years.

“There’s heightened risk aversion on concern that the current financial-markets crisis could extend a bit longer,” said Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore. The tests are “causing some anxiety in the market. The dollar is fairly well bid.”

Singapore’s dollar slipped 0.4 percent to S$1.5336 against the U.S. currency as of 11:06 a.m. local time, and the baht weakened 0.6 percent to 35.99, the lowest level since January 2007, according to data compiled by Bloomberg. Taiwan’s dollar declined 0.2 percent to NT$34.798 and traded near the lowest in more than five years, according to Taipei Forex Inc.

A slump in exports and a weakening financial-services industry pushed Singapore deeper into recession, the trade ministry said today. Gross domestic product declined an annualized 16.4 percent last quarter from the previous three months, after shrinking a revised 2.1 percent between July and September.

Export Dependent

Reports tomorrow will show Malaysia’s and India’s economies expanded at the slowest pace in at least four years, according to economists in Bloomberg News surveys.

Taiwan’s export orders in January tumbled by a record 42 percent and industrial output plunged 43 percent, the most ever, the Ministry of Economic Affairs reported Feb. 24. Taiwan’s central bank slashed the benchmark interest rate to an all-time low immediately after the reports.

“Both these currencies are driven by the fact that they are very export dependent,” Thio said. “In Singapore, the weight will fall on the Singapore dollar to take the adjustment.”

Taiwan’s dollar touched NT$34.862 on Feb. 23, the weakest level since April 2003. BNP’s Thio expects the Singapore and Taiwan dollars to fall to S$1.60 and NT$36 respectively, by the end of June.

Rate Cut

The baht slumped to a two-year low on concern sliding interest rates will deter foreign funds from investing in the nation. The central bank yesterday cut its benchmark rate by half a percentage point to 1.5 percent to buoy demand after consumer prices fell and the economy shrank. Overseas investors sold $71 million more Thai stocks than they bought this month.

Elsewhere, South Korea’s won declined 0.2 percent to 1,519.50 against the dollar. Malaysia’s ringgit declined 0.2 percent to 3.6740 per dollar and the Indian rupee dropped 0.2 percent to 50.055. The Philippine peso slipped 0.1 percent to 48.175 and the Indonesian rupiah gained 0.2 percent to 11,988. China’s yuan and Vietnam’s dong were little changed at 6.8391 and 17,483.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net.