Asian currencies dropped, led by plunges in the South Korean won and Indonesia’s rupiah, after the Federal Reserve said there are “significant downside risks” to the U.S. economy, hurting the region’s export outlook. The Bloomberg-JPMorgan Asia Dollar Index fell to an eight- month low as the MSCI Asia-Pacific Index of shares lost 3 percent. A report today will show growth in Thai overseas shipments slowed last month, according to economists surveyed by Bloomberg. Moody’s Investors Service cut its ratings on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., saying the U.S. government is “more likely” to allow a large bank to fail than it was during the financial crisis. The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, declined 0.4 percent to 115.38 as of 10:05 a.m. in Hong Kong. The won slumped 2.3 percent to 1,176.93 per dollar, the rupiah weakened 1.9 percent to 9,258 and Taiwan’s dollar dropped 0.9 percent to NT$30.213, according to data compiled by Bloomberg. “Investors are trimming their portfolios and selling their holdings of emerging-market assets in Asia on risk aversion,” said Shigehisa Shiroki, chief trader on the Asian and emerging- markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Asia can’t avoid a slowdown in exports due to the conditions in the U.S. and Europe. The downgrade of U.S. banks’ credit ratings is worsening sentiment.” The Fed said yesterday it will replace $400 billion of short-term debt in its portfolio with longer-term Treasuries to reduce borrowing costs and counter the rising risk of another recession. Plunging Rupiah The International Monetary Fund lowered its forecast for 2011 global economic growth to 4 percent from 4.3 percent this week, and for 2012 to 4 percent from 4.5 percent, predicting a “severe” fallout if Europe fails to contain its debt crisis. Global funds sold $3 billion more Taiwanese, South Korean and Indonesia equities than they bought this month through yesterday, exchange data show. The rupiah plummeted to its weakest level since May 2010 as foreign funds reduced holdings of Indonesia assets. Overseas holdings of the country’s sovereign bonds fell 5.6 percent to 233.49 trillion rupiah ($25.3 billion) as of Sept. 20, debt management office data show. “The market is in a panic on concern the U.S. and Europe’s crisis has come to Asia,” said Lindawati Susanto, head of treasury at PT Bank Resona Perdania in Jakarta. “It’s not possible for Indonesia to avoid this kind of situation. Bank Indonesia is trying to calm the market in this turmoil.” Concern Over Outflows The won sank to a one-year low as overseas investors pulled money from Korean stocks, adding to net sales of $918 million this month through yesterday. The potential outflow of foreign capital from South Korea is a major concern, Financial Services Commission Chairman Kim Seok Dong said today in a CBS radio interview. The current global economic difficulties will likely drag on for “quite a long” period, Kim said. “It seems the Fed announcement is boosting demand for dollars instead of doing the opposite, after its comments on the economic downside risk,” said Lee Jin Ill, a Seoul-based senior currency dealer with Hana Bank. “The plan to buy long-term bonds was already expected and reflected in market prices.” Taiwan’s dollar slid to an eight-month low on concern slowing global growth will weaken demand for the island’s exports and hamper job creation. The jobless rate rose to 4.4 percent in August from 4.37 percent in July, according to the median estimate of nine economists in a Bloomberg survey. Government data are due at 4 p.m. today. “The Taiwan dollar is following the trend in Asian currencies,” said Tarsicio Tong, a Taipei-based trader at the Union Bank of Taiwan. “But I don’t think the central bank will allow the currency to depreciate a lot and they will come in.” Elsewhere, Thailand’s baht dropped 0.5 percent to 30.63 per dollar, the Philippine peso declined 0.4 percent to 43.713 and Malaysia’s ringgit weakened 0.3 percent to 3.1505. China’s yuan was little changed at 6.3836. To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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