Asian Currencies Decline, Led by Won, as Dubai Roils Markets

Nov. 28 (Bloomberg) -- Asian currencies fell, led by the South Korean won and Indian rupee, as emerging markets took a beating after Dubai sought to delay debt payments, bolstering demand for safety in U.S. Treasuries and the dollar.

Regional currencies declined this week, while the MSCI Asia-Pacific Index of local shares slumped to the lowest level in almost eight weeks. The greenback rose against 15 of 16 major currencies yesterday after state-owned Dubai World, with $59 billion of liabilities, requested a “standstill” agreement from creditors. The Philippine peso dropped after data on Nov. 26 showed third-quarter growth fell short of analysts’ estimates.

“Dubai prompted a wave of risk aversion globally,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Calyon, the investment-banking unit of France’s Credit Agricole SA. “We see Asian currencies a bit vulnerable in this environment. It’s not going to be a huge fallout because Asia looks more solid in terms of fundamentals.”

The won yesterday dropped 1.7 percent to 1,175.35 per dollar and was down 1.4 percent on the week, the biggest loss in five, according to data compiled by Bloomberg. India’s rupee declined 0.4 percent to 46.6387 and fell 0.01 percent from Nov. 20. Markets in Indonesia, Singapore and Malaysia were closed yesterday for public holidays.

South Korea’s financial companies were owed a combined $32 million from Dubai World and its property unit Nakheel PJSC as of the end of September, the MoneyToday newspaper reported, citing the nation’s financial regulator.

Korea Surplus

Losses in the won were tempered as the Bank of Korea yesterday reported its biggest current-account surplus in four months. The surplus increased to $4.9 billion in October from a revised $4 billion the previous month. The current account is the broadest measure of trade, tracking the flow of goods, services and investment income.

“The current account reflects the increasing health of Korea’s external position and it’s quite a strong buffer to any risk-related pressure,” said Kotecha.

Taiwan’s economy contracted at the slowest pace in a year in the third quarter on rising Chinese demand for the island’s electronics, a government report showed Nov. 26. Gross domestic product shrank 1.29 percent from a year earlier, after contracting a revised 6.85 percent in the second quarter.

The Philippine currency fell for a second week after the government reported on Nov. 26 the economy grew 0.8 percent in the third quarter from a year earlier, matching the revised expansion in the previous period, the National Statistical Coordination Board said. Economists in a Bloomberg News survey had forecast a 1.9 percent expansion.

‘Buy-Dollar Scenario’

The Philippine peso declined 0.8 percent in Manila yesterday to 47.205 and lost 0.3 percent for the week. Taiwan’s dollar dropped 0.3 percent to NT$32.345, little changed from Nov. 20.

The economic data in the Philippines disappointed markets because “it was below all expectations,” said Rafael Algarra, treasurer at Security Banking Corp. in Manila. “The possible default by Dubai World has implications for emerging markets in general. In times of uncertainty, it’s a ‘buy-dollar’ scenario.”

Ten-year U.S. Treasury notes yesterday rose the most this month, driving yields to the lowest level since the start of October. The cost of protecting government notes from default from Abu Dhabi to Bahrain climbed. Credit-default swaps on Dubai yesterday rose 134 basis points to 675 points, according to CMA DataVision prices.

Elsewhere in Asian currency markets, Thailand’s baht was down 0.1 percent from the end of last week at 33.26 per dollar. The Malaysian ringgit declined 0.2 percent to 3.3910, and Indonesia’s rupiah fell 0.7 percent to 9,535 from a week ago. The Singapore dollar dropped 0.1 percent to S$1.3897.