Sunday, August 10, 2008

Asian Currencies Slump as Slowing Growth May Damp Asset Demand

Asian currencies slumped this week, led by Singapore's dollar, on concern slowing global growth will curb demand for the region's assets.

Singapore's currency posted its biggest weekly loss in a decade after the Straits Times newspaper yesterday cited Finance Minister Tharman Shanmugaratnam as saying the economy is moving toward a slowdown and growth is unlikely to rebound ``anytime soon.'' Nine of the 10 most-active Asian currencies outside of Japan fell this week.

``Tharman's dovish comments confirm expectations that the central bank won't be seeking any further policy tightening,'' said Emmanuel Ng, economist at Oversea-Chinese Banking Corp. in Singapore. ``Second-quarter GDP and the full-year growth numbers also run the risk of being revised downwards at Prime Minister Lee's speech later today.''

The local dollar weakened as much as 2.3 percent this week to S$1.4014 against the U.S. currency in Singapore, the biggest loss since the five days ended June 26, 1998, according to data compiled by Bloomberg.

The Philippine peso lost 0.3 percent this week to 44.335, Indonesia's rupiah dropped 0.8 percent to 9,170 and Thailand's baht declined 0.5 percent to 33.70. Vietnam's dong advanced 1.2 percent this week to 16,550.

Shipments Slow

Taiwan's dollar had its biggest weekly loss in more than two years on speculation slowing global economic growth will curb demand for consumer electronics produced by the island's exporters.

The currency fell for a ninth day, the longest losing streak since July 2005, after a government report Aug. 7 showed shipments grew last month at less than half the pace forecast by economists. Taiwan's gross domestic product may expand 4.78 percent this year, the slowest since 2005, according to a statistics bureau forecast released in May.

``The Taiwan dollar is finding it difficult to fight the strong U.S. dollar trend that's happening in the whole region,'' said Philip Wee, a currency strategist at DBS Group Holdings Ltd. in Singapore. ``Europe and Japan are all showing negative growth numbers, and the Asian region is seeing declining GDP.''

Taiwan's dollar fell 1.5 percent this week to NT$31.090 against the U.S. currency, according to Taipei Forex Inc.

Political Risks

Taiwan's export growth slowed to 8 percent in July from 21.3 percent the previous month, the government reported. Economists in a Bloomberg News survey forecast overseas sales, which account for about half of the island's GDP, would increase 17.1 percent.

Malaysia's ringgit fell for a sixth day, paring most of this year's advance, on concern that investors are selling local assets on heightened political risks and as the price of commodities the nation exports declined.

The currency finished its worst week in almost nine months as a decline in the nation's foreign-exchange reserves indicated global funds are taking their money out of the country.

Police this week charged opposition leader Anwar Ibrahim for engaging in ``unnatural sex,'' a crime in Muslim-majority Malaysia. Anwar pleaded not guilty, saying it was a ploy to derail his political comeback.

`No Surprise'

``It's no surprise if capital is flowing out especially from the equity market,'' said Carol Chan, a currency analyst in Hong Kong at CFC Seymour Ltd. ``Political unrest is also compounding the situation. For sure, commodity prices are trending down and that also will have an impact on exports.''

The ringgit fell 1.2 percent this week to 3.3015 against the U.S. dollar, according to data compiled by Bloomberg. The currency, which started the year at 3.3070, has declined for a sixth straight day, the longest run since October 2006.

South Korea's won posted a second weekly decline as global funds sold local stocks and refiners imported oil, increasing demand for the dollar.

Losses in the currency were limited after the Bank of Korea raised its key interest rate to an eight-year high of 5.25 percent on Aug. 7 to curb inflation. Global investors have sold more local shares than they bought every day except five since June 1, according to stock exchange data.

``There's pent-up demand for the dollar from foreign stock sales and importers' deals,'' said Lee Yoon Jin, a currency dealer with state-run Korea Development Bank in Seoul.

Korea's currency fell 1.3 percent this week to 1,027.90 against the dollar, according to Seoul Money Brokerage Services Ltd. The decline widened this year's loss to 9.3 percent, the second-worst performance among the 10 most-active currencies outside of Japan.

click here: Asian Currencies Slump as Slowing Growth May Damp Asset Demand Bloomberg