Asian Currencies Drop, Led by Won, on Weakening Exports, Growth

By Bob Chen

Feb. 24 (Bloomberg) -- Asian currencies fell, with the South Korean won approaching an 11-year low, after a slide in U.S. stocks prompted investors to avoid emerging-market assets.

The Korean currency shed 17 percent this year, the biggest drop among the 10 most-traded Asian currencies excluding the yen, as the Standard & Poor’s 500 Index slumped to a 12-year low. Taiwan’s dollar declined, after yesterday touching a five-year low, before reports today that will probably show slumping export orders and industrial production.

“There’s pressure on all Asian currencies at the moment,” said Thomas Harr, senior currency strategist at Standard Chartered Plc in Singapore. “We’re seeing very weak economic data in Asia, because the growth in exports to developed countries is very weak. Our view is that the economy in Asia will bottom out around the end of the second quarter.”

The won fell 1.5 percent to 1,510 per dollar as of 11:01 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. Taiwan’s dollar dropped 0.3 percent to NT$34.717, according to Taipei Forex Inc. The ringgit declined 0.5 percent to 3.6685, near the lowest since October 2006.

The worst is yet to come for Asia’s export-dependent economies as the global recession stifles demand, said Marc Faber, publisher of the “Gloom, Boom & Doom Report.” A National Association for Business Economics survey signaled the U.S. recession will be the worst in more than three decades.

Reports this week will show Malaysia and India’s economies expanded at the slowest pace in at least four years, according to economists in Bloomberg surveys. Taiwan export orders will show a 38 percent drop in January from a year earlier, economists forecast.

Slumping Exports

“People don’t realize that what we’ve seen so far may be just the ‘appetizer’ of a global economic slump and that economic conditions, with a time lag, will worsen far more,” Faber said in a telephone interview from Chiang Mai, Thailand.

The MSCI Asia Pacific Index of regional shares fell 2.2 percent, bringing declines this year to 17 percent. The Kospi stock index slumped 2.9 percent as overseas investors sold more Korean shares than they bought for an 11th straight day.

“The unrest in global financial markets is rocking traders’ confidence again,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “There’s caution against intervention above 1,500 that will prevent the won from plunging.”

Finance Minister Yoon Jeung Hyun urged companies to hire more workers and increase their investment spending today as the economy faces a recession. He also said after a meeting with business leaders that the government should “refrain” from officially commenting on the currency.

Asian Economies

The economies of Asia’s developing countries will probably grow 5.5 percent this year, the slowest pace since 1998, the International Monetary Fund said in last month’s update of its World Economic Outlook report. Singapore, Taiwan, Hong Kong and Japan are already in recessions. Thailand’s government yesterday warned its economy may enter a recession this quarter.

Central banks from South Korea to Malaysia have cut interest rates to spur demand, while Asian governments have pledged more than $685 billion in spending over five years to spur growth.

The ringgit fell as some economists predict Bank Negara Malaysia will today keep its overnight policy rate on hold even as the economy expanded at the slowest pace in seven years in the final quarter of 2008. Bank Negara will keep its benchmark rate at 2.5 percent, according to eight of 15 economists in a Bloomberg News survey.

Malaysia Slowdown

“Wealth destruction is causing risk aversion in the market and that’s affecting the ringgit,” said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation’s biggest rating company. “The region is facing a confidence issue, and a rate cut may not be sufficient in itself to address falling exports and growth.”

Malaysia’s economy expanded 1.4 percent in the final quarter of last year, versus 4.7 percent in the preceding three months, a separate survey shows. The central bank will report the data on Feb. 27.

Elsewhere, the Indonesian rupiah dropped 0.8 percent to 12,025 against the dollar and the Philippine peso declined 0.3 percent to 48.175.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.