BLBG: Asian Currencies: Won, Rupiah Lead Weekly Drop on Risk Aversion
South Korea’s won and the Indonesian rupiah led declines in Asian currencies this week on speculation investors will stay away from emerging-market assets as the global financial slump deepens.
The won posted its fifth weekly drop, approaching an 11- year low, on concern that global market turmoil will make it difficult for banks to raise funds needed to service overseas debt. The rupiah headed for its eighth weekly loss after Bank Indonesia Deputy Governor Hartadi Sarwono said yesterday exports may drop as much as 28 percent in 2009, the most in 27 years.
“I am bearish on all Asian currencies, like the Singapore dollar, the Korean won, the Indonesian rupiah, the Malaysian ringgit and the Philippine peso,” said Ken Hirose, a portfolio manager in Tokyo at Nikko Asset Management Co., which oversees the equivalent of $109 billion in assets globally. “All of them should be much weaker against the U.S. dollar because globally everybody is unwinding their positions.”
The won fell 1 percent this week to 1,550 per dollar at the 3 p.m. local close, according to Seoul Money Brokerage Services Ltd. The currency touched 1,597, the lowest since 1998. The rupiah dropped 0.2 percent this week and traded at 12,005 in Jakarta, according to data compiled by Bloomberg.
The Korean currency declined 19 percent so far this year, the worst among the 10 most-traded currencies in Asia outside Japan. The government plans to sell as much as $1 billion of global bonds this month, online news agency MoneyToday reported, citing unidentified officials. The Ministry of Strategy and Finance said it hasn’t determined the sale’s “timing or size.”
Difficult Month
“Investors are on a very tough psychological spot as global turbulence is showing no signs of abating,” said Park Sang Bae, a currency dealer with Industrial Bank of Korea in Seoul. “March is a difficult month for the won due to dividends paid to foreign share holders and sizable debt set to mature.”
The Kospi stock index fell 0.3 percent, tracking a slump in the Standard & Poor’s 500 Index to the lowest level since 1996.
South Korean banks had $92.6 billion of foreign debt as of Jan. 31, including $38.3 billion maturing by the end of this year, according to data provided on Feb. 27 by the Bank of Korea. The foreign debt included loans, bonds and other securities, the central bank said.
The yen fell against the euro on speculation Japan’s worsening political turmoil and economic recession are reducing the haven appeal of the currency.
The Japanese currency declined to 123.48 per euro in Tokyo from 123.00 late in New York yesterday.
Remittances Concern
The Philippine peso touched its lowest in three months this week on concern remittances from overseas Filipino workers and exports will slide. Nikko Asset Management Co., HSBC Holdings Plc and Royal Bank of Scotland Plc say the Philippine peso will depreciate.
Remittances, which reached a record $16.4 billion last year, probably will fall 20 percent this year, says HSBC, Europe’s largest bank by value. RBS predicts remittances will drop 8 percent, even though central bank Governor Amando Tetangco said Feb. 25 he expects no change.
The peso fell as much as 0.4 percent to 48.835 before erasing its losses to trade at 48.52 against the dollar in Manila, according to Tullett Prebon Plc. The currency has lost 2.1 percent this year. It touched 49.26 this week, the lowest since Dec. 9.
Taiwan’s Dollar
Taiwan’s dollar rose for a fourth day, snapping a three-week slump, as China proposed an economic accord. Premier Wen Jiabao said yesterday that China wants to accelerate normalization of cross-straits trade relations.
“Political risk declined in Taiwan as it seems China is really intent on improving the relationship,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “There’s some relief in the currency market.”
Taiwan’s dollar strengthened 0.5 percent this week to NT$34.780 against the U.S. currency, according to Taipei Forex Inc. The currency will fall to NT$36 at the end of March, SJS’s Kowalczyk said.
The island’s dollar has weakened about 5.5 percent this year and touched NT$35.297 on March 3, the lowest level since July 2001, as the economy slid into a recession last quarter.
China is Taiwan’s biggest trading partner, with the mainland and Hong Kong accounting for 30 percent of the island’s overseas sales in January. China and Taiwan have been administered separately since the end of a civil war in 1949.
Malaysian Exports
China, Taiwan and the Philippines will report export data next week, with economists in a Bloomberg survey expecting no change for China and a contraction for Taiwan. Policy makers at the Bank of Korea will also meet next week after cutting the benchmark interest rate to a record-low 2 percent last month.
Malaysia’s ringgit posted a fourth weekly loss after a government report today showed exports fell the most in 15 years in January, pushing the economy closer to a recession.
The currency traded at the lowest level in more than three years on concern a slowdown will prompt global investors to sell more local assets. Overseas shipments dropped 27.8 percent from a year earlier, after slipping 14.9 percent in December, the trade ministry said in a statement in Kuala Lumpur today.
“The ringgit is not just a reflection of the economic slowdown but also a function of capital flows,” said Danny Wong, chief executive officer at Kuala Lumpur-based Areca Capital Sdn., which manages about $80.5 million. “People are withdrawing money from emerging markets, not just from Malaysia.”
The ringgit traded at 3.7155 per dollar versus 3.7275 yesterday, according to data compiled by Bloomberg. The currency dropped 0.3 percent this week and reached 3.7390, the lowest since February 2006.
Elsewhere, the Thai baht traded at 36.09 versus 36.15 last week and Vietnam’s dong was little changed at 17,481. India’s rupee slipped 0.8 percent this week to 51.555.
