Asian Currencies Drop, Led by Won, on Signs Slowdown Deepening

By David Yong

Feb. 10 (Bloomberg) -- Asian currencies fell, led by South Korea’s won, on concern the slump in the region’s economies is deepening, discouraging investors from buying local assets.

The won traded at a one-week low against the greenback after South Korea’s new Finance Minister Yoon Jeung Hyun today said the economy will contract 2 percent in 2009, reversing an earlier prediction for 3 percent growth. The Indonesian rupiah declined for a second day on concern investors will avoid riskier assets after the Nikkei newspaper reported that Russian banks and businesses may ask foreign lenders to reschedule debt.

“The won’s weakness is economy-led,” said Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong. “South Korea is one of the countries most sensitive to the slowdown in global trade.”

Korea’s currency weakened 0.5 percent to 1,386.35 against the dollar as of 12:45 p.m. local time, according to Seoul Money Brokerage Services Ltd. The rupiah dropped 0.3 percent to 11,805 and the Thai baht declined 0.1 percent to trade near a three- week low of 35.02.

The won extended this year’s loss to 9.2 percent as the International Monetary Fund last week said South Korea’s economy will shrink 4 percent this year, the first annual decline since the Asian financial crisis a decade ago, as the deepening global recession takes a toll on demand at home and abroad. MoneyToday website reported on Feb. 5 the Bank of Korea will cut its GDP forecast to 0.3 percent for 2009.

Russian Debt

The MSCI Asia Pacific Index of regional shares fell for a second day as the Nikkei newspaper reported Russian banks are seeking to reschedule about $400 billion of debt owed to foreign lenders including HSBC Holdings Plc and Deutsche Bank AG, spurring demand for safe-haven assets.

The euro declined 1.4 percent to $1.2823 in Tokyo, from $1.30003 late in New York yesterday, ending a two-day advance. The yen rose for a second day to 91.36 per dollar from 91.46 yesterday.

The rupiah has slid 7.6 percent so far this year as stock exchange data showed overseas investors sold more Indonesian equities than they bought. Russia’s central bank yesterday raised the interest rate it charges on repurchase loans to halt a slide in its currency.

“Risk appetite is souring somewhat early in Asia today on news that Russian banks may be seeking to reschedule their loans,” said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore. “The Indonesian rupiah may be centered around 11,750 pending further developments on the risk aversion front.”

Export Slide

The Philippine peso weakened for the first time in six days after a government report showed exports slumped by the most in at least 27 years.

The peso, the best performer this year among the 10 most- active currencies in Asia outside Japan, snapped its longest winning streak in two months as overseas sales in December dropped 40.4 percent, the most since Bloomberg started tracking the data in 1981. Economists in a Bloomberg News survey had estimated a median 23.9 percent drop.

“With exports plunging worse than expectations, there’s really no reason to put a short bet on the dollar-peso,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “This strengthens the case for a more aggressive easing from the central bank and increases the urgency for government support.”

Currency Swap

The peso fell 0.2 percent to 47.080 per dollar in Manila, according to Tullett Prebon Plc. The currency may drop to 49 this quarter as exports sustain “double-digit” declines, Varathan said. A short position is a bet an asset’s value will depreciate.

Merchandise exports account for about 27 percent of the Philippine economy, which is set for its worst performance in eight years in 2009.

Malaysia’s ringgit strengthened on optimism a three-year 40 billion ringgit ($11 billion) foreign-exchange swap with China on Feb. 8 will help ease a cash shortage and boost trade with Asia’s fastest-growing economy.

“The swap provides some assurance in terms of liquidity in the market, especially against the backdrop of the recent decline in currency reserves,” said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “It’s a positive for the ringgit and long-term trade outlook.”

The ringgit rose to 3.5925 per U.S. dollar in Kuala Lumpur, according to data compiled by Bloomberg, versus 3.5965 on Feb. 6. Financial markets in Malaysia were closed yesterday for a holiday.

Elsewhere, India’s rupee dropped 0.2 percent 48.685 a dollar and Taiwan’s dollar gained 0.34 percent to NT$33.860. China’s yuan was little changed at 6.8330 and the Vietnamese dong held at 17,484.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net.