Asian Currencies Post Weekly Drop on Default Risk, Led by Won

Dec. 12 (Bloomberg) -- Asian currencies fell this week, led by the South Korean won and India’s rupee, as concern about the pace of a global economic recovery and the risk of debt defaults deterred investment in emerging-market assets.

State-run Dubai World met with creditors to restructure $26 billion of borrowings and Fitch Ratings downgraded its credit rating for Greece. Federal Reserve Chairman Ben S. Bernanke said Dec. 7 the U.S. economy faces “formidable headwinds” that will keep expansion to a “moderate” pace.

“Risk has been progressively pared into the year-end,” said Emmanuel Ng, a currency economist at Oversea-Chinese Banking Corp. in Singapore. “Concerns about Dubai and the European economies will have a sporadic effect on risk appetite and Asian currencies.”

The won slid 1 percent this week to 1,164.05 per dollar this week, according to data compiled by Bloomberg. The Indian rupee weakened 0.5 percent to 46.53 and the Singapore dollar dropped 0.6 percent to S$1.3892.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10-most traded currencies against the greenback excluding the yen, fell 0.2 percent in the week.

State holding company Dubai World said on Dec. 1 it began “constructive” talks with banks to restructure $26 billion of debt, while Moody’s Investors Service slashed the credit ratings for six Dubai government-related firms, saying “no meaningful” support should be assumed for companies if the government hasn’t guaranteed them.

China’s exports slid 1.2 percent in November from a year earlier, the customs bureau said on its Web site yesterday, after falling 13.8 percent in October. The central bank has held the yuan at about 6.83 to the dollar for the past 17 months to shield exporters from the global economic slump.

India Curbs

India’s rupee, the best-performing Asian currency this quarter, may retreat in the coming weeks after the nation tightened rules on overseas borrowing that were eased during the credit crisis, Standard Chartered Plc said.

The U.K. bank, which gets most of its profit in emerging markets, is reviewing its short-term “overweight” rupee rating, according to Mumbai-based strategist Priyanka Chakravarty. The currency will still strengthen by the end of 2010 as India’s economic growth attracts investment, Chakravarty said.

Korean Growth

South Korea’s won halted a four-day losing streak yesterday after the central bank raised its 2010 economic growth forecast, saying a global recovery is helping boost exports.

Gross domestic product will increase 4.6 percent next year after gaining 0.2 percent this year, the central bank said yesterday. In July, the central bank estimated the economy would contract 1.6 percent in 2009, before expanding 3.6 percent next year.

The won will “be one of the Asian currencies that’ll benefit the most from the recovery of risk appetite and the normalization of global economic growth in the next six months,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon.

The Bank of Korea kept its benchmark interest rate at a record-low 2 percent on Dec. 10 and signaled increases are planned. The won has strengthened 8.2 percent this year, the second-best performer among Asia’s 10-most active currencies excluding the yen.

Malaysia’s ringgit traded near a one-month low as the FTSE Bursa Malaysia KLCI Index lost 0.8 percent this week. The ringgit weakened 0.5 percent to 3.3995 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.4125 on Dec. 9, the weakest level since Nov. 6.

Dubai Concerns

“Dubai concerns affected the market a bit this week and people are not so sure about the outcome” of the debt talks, said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur. “China’s data could be positive for the ringgit because of the growing importance to Asia’s economies.”

Reports in the past week showed Malaysia’s manufacturing and overseas sales increased in October for the first time in at least a year. China today announced a 19.2 percent increase in industrial output for November, the fastest growth in more than two years.

Elsewhere in Asian trading, the Indonesian rupiah fell 0.3 percent to 9,443 versus the greenback this week and the Philippine peso dropped 0.3 percent to 46.13. The Taiwan dollar weakened 0.3 percent to NT$32.278 while the Thai baht was little changed at 33.10. The yuan traded at 6.8277 from 6.8270 at the end of last week.