Asian Currencies Decline This Week, Led By Won, on Credit Risk

Dec. 19 (Bloomberg) -- Asian currencies fell this week, led by South Korea’s won and the Philippine peso, as concern about the creditworthiness of nations including Greece and Mexico prompted investors to shun emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index dropped for a second week after Standard & Poor’s cut Greece’s debt rating to BBB+ from A- and signaled it may lower the level further. The company also downgraded Mexico’s ranking one level to BBB. The peso declined for a second week as the government said it may raise its budget deficit estimate for next year.

“There’s a flight to safety and it weighs on the emerging currencies,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “But there’s a recognition that the Asian financial situation is less vulnerable than some of these European countries.”

The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, declined 0.5 percent this week. The won fell 1 percent 1,176 per dollar, according to data compiled by Bloomberg. The peso slipped 1.1 percent to 46.618 and the Taiwan dollar dropped 0.3 percent to NT$32.278.

Emerging-market equity fund inflows slowed in the week to Dec. 16, with 2010 poised to be a more “testing year” amid waning stimulus measures worldwide, EPFR Global said Dec. 17. Net inflows were $571 million, down from $2.3 billion the previous week. Overseas investors bought $15 million more Korean shares than they sold this week, following net purchases of $645 million in the previous five trading days.

Foreigners Sell

“Flows into Korean equities slowed, which probably adds to a little more downside pressure on the Korean won,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “We remain bullish on Asian currencies. Next year we’ll see inflows into Asian equities return, and the economic picture will continue to show improvement over other regions.”

Sales at South Korea’s three largest department-store chains rose 6.4 percent from a year earlier in November, a ninth straight gain, and Singapore’s non-oil domestic exports climbed for the first time in 19 month, according to government data released this week. Jobless rates declined in Hong Kong and the Philippines, whose central bank kept its benchmark interest rate at a record-low 4 percent.

Deficit Woes

The peso yesterday touched a two-week low of 46.765 per dollar as foreigners trimmed their holdings of the nation’s shares for a second day.

The Philippine budget deficit in the first 10 months of 2009 was 250 billion pesos ($5.4 billion), headed for an annual record. Finance Secretary Gary Teves said yesterday that the government’s 233.4 billion peso estimate for next year may be raised to close to 300 billion pesos because of weak revenue and increased public spending.

“The deficit still can’t be pinned down and that’s a negative,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila.

Elsewhere, the Singapore dollar fell 0.9 percent in the week to S$1.4009 versus the greenback and the Indian rupee declined 0.5 percent to 46.7712. China’s yuan was little changed at 6.8280.