Asian currencies fell this week, led by the Indian rupee, on concern the deepening global economic slump will hurt the region's growth prospects and exports. Thailand's baht had the biggest weekly loss in almost seven months as the government predicted an onset of a recession. A Japanese report showed industrial production fell the most in 55 years in November.
“While we are not calling for a structural collapse in Asian currencies, we think sentiment and further macroeconomic weakness are likely to continue to weigh in on them for now,” said Nizam Idris, a currency strategist with UBS AG in Singapore. “Trading will remain slow until early 2009.” The rupee slid 2.5 percent this week to 48.445 a dollar in Mumbai, according to data compiled by Bloomberg. Indonesia's rupiah fell 1.4 percent to 11,100 and Taiwan's dollar dropped 1.5 percent, the most in two months, to NT$33.025.
Japan's factory output tumbled 8.1 percent last month from October, when it dropped 3.1 percent, the trade ministry said yesterday. The Thai economy will contract 2 percent to 3 percent this quarter and shrink in the three months through March as well, Somchai Sujjapongse, a spokesman at the finance ministry said on Dec. 24. The MSCI Asia Pacific Index of regional shares dropped 2.2 percent this week, extending the year's losses to almost 45 percent, the worst in its two-decade history.
Selling equities
India's finance ministry in its mid-year review on December 23 said that Asia's third-largest economy may grow as little as 7 percent in the year ending March 31.
Malaysia's ringgit fell 0.3 percent this week, extending this year's drop to 4.8 percent, compared with a 28 percent loss in South Korea's won and a drop of 18.6 percent in India's rupee, the worst performers in Asia this year.
“We're going to see a very gloomy and grim economic situation in Asia including Malaysia into next year, “ said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “That would prompt investors to sell Asian currencies including the ringgit.”
The ringgit traded at 3.4800 against the dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.6474 on Dec. 5, the lowest level since November 2006.
Devaluation
The Vietnamese dong fell to a record low after the State Bank of Vietnam on December 25 devalued the currency by 3 percent to help spur exports. Policy makers are relying on a weaker currency to help boost shipments of the nation's garments and coffee as a government report showed the Southeast Asian economy expanded in 2008 at the slowest pace in nine years.
The dong weakened to 17,490 a dollar yesterday, the lowest since Bloomberg started tracking the exchange rate in June 1993. It ended the week 2.5 percent lower at 17,425 after the biggest two-day slide in a decade. The central bank fixed the daily reference rate for dong trading at 16,987 a dollar yesterday, according to its Web site, after lowering it by 3 per cent to 16,989 a day earlier.
Stemming losses
The Korean won gained for a second day yesterday, trimming the week's loss to 0.7 percent, on speculation officials are buying the currency to reduce foreign-exchange losses as companies close their books for the year.
The government is seeking to ensure that the economy keeps growing next year even though many countries in Asia are headed for recessions, President Lee Myung Bak said on December. 25. The currency is set for its biggest annual drop since 1997.
“The government's intention to manage the year-end exchange rate below 1,300 appears to be a determined one,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. The won traded at 1,299, compared with 1,290 a week ago, according to Seoul Money Brokerage Services. Elsewhere, the Chinese yuan traded at 6.8414 a dollar, versus 6.8465 a week earlier. Singapore's dollar traded at S$1.4464, compared with S$1.4537 on Dec. 19. Trading in the Philippines will resume after the holidays on January 5.
