Asia Currencies Post Weekly Decline on Intervention Speculation

Oct. 24 (Bloomberg) -- Asian currencies fell this week, with the Korean won and the Philippine peso both sliding the most in more than four months, on speculation policy makers will limit currency gains to support exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active regional currencies excluding the yen, declined for the first time since August. Brazil this week imposed a 2 percent levy on foreigners’ purchases of bonds and stocks to help curb the real’s appreciation, cooling demand for emerging- market assets.

“Generally, Asian policy makers have been intervening to resist the currency gains over the past few months,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “The yuan has been pegged for the past year so nobody wants to lose too much competitiveness to China.”

The won was at 1,181.25 per dollar yesterday, 1.5 percent lower than on Oct. 16. The currency rose in each of the previous eight weeks and reached 1,155.05 on Oct. 15, the strongest level in a year. The peso declined 0.8 percent this week to 46.995 and Indonesia’s rupiah slid 0.4 percent to 9,435, paring this year’s advance to 16 percent.

The yuan has dropped 8.6 percent from a record high on March 9 against the currencies of major trading partners including the euro and the Japanese yen, a Westpac Banking Corp. index shows. It’s weakened 16 percent versus the rupiah and 14 percent against the won during the past six months.

Expanding Economies

China’s economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, according to data published Oct. 22. The People’s Bank of China has kept the yuan at about 6.83 per dollar since July 2008, following a 21 percent gain in the previous three years.

South Korea’s won strengthened yesterday, after touching its lowest level this month on Oct. 22, as the nation’s expanding economy and improving corporate earnings helped draw funds from abroad. An Oct. 26 report will show gross domestic product increased 1.9 percent in the third quarter from the previous three months, according to the median forecast of economists surveyed by Bloomberg News.

“The fundamentals remain supportive of the stock market and the won,” said Action’s Cohen. “It seems that the global economy is on the mend and South Korea has been leading the turnaround in the region.”

Finance Minister Yoon Jeung Hyun said yesterday the government will work with the central bank to stabilize the currency if needed, adding that policy makers “won’t sit idle” should moves prove one-sided.

Intervention Risk

Indonesia’s rupiah declined for the first week in seven as some investors judged excessive the rally that made the currency Asia’s best performer this year. It rose yesterday as the outlook on the nation’s credit rating was raised to positive from stable by Standard & Poor’s.

The Jakarta Composite Index, which has surged 82 percent in 2009, also had its steepest weekly slide since early September after foreign funds pulled $169 million from local stocks in the first four days of the week. Bank Indonesia will “guard” the pace of the rupiah’s appreciation, central bank Deputy Governor Hartadi Sarwono said Oct. 22.

“There’s been a lot of profit-taking this week in the Jakarta stock exchange leading to capital outflows,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta.

‘Smoothen’ Fluctuations

The Philippine peso fell on concern higher crude oil prices will boost the nation’s energy bill.

The nation imports almost all of the oil it uses and the price of the fuel has climbed more than 80 percent this year. The peso last week reached a nine-month high of 46.253 per dollar and central bank Governor Amando Tetangco said Oct. 21 that policy makers would “smoothen sharp fluctuations” in the currency while letting the market determine the exchange rate.

“The Philippines needs to pay more for the importation of oil and that’s putting pressure on the peso,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila. “Most central banks in Asia are also intervening in the foreign-exchange market to limit their currency’s appreciation instead of raising interest rates.”

Elsewhere, India’s rupee declined 0.5 percent this week to 46.52 versus the greenback and Taiwan’s dollar fell 0.3 percent to NT$32.398. Thailand’s baht and the Chinese yuan were little changed at 33.43 and 6.8286.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net;
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