Regional currencies have added to last year’s losses in 2009, led by the rupiah and South Korean won, as the deepening global recession erodes exports and foreign-exchange earnings. Indonesia is looking to expand a $6 billion currency swap with Japan to help bolster its reserves, while Singapore and Korea this week were among other central banks that extended agreements with the Federal Reserve to meet a dollar shortage.
“The currency swap deal is not enough to calm the market,” said Muhammad Fauzi Halim, a foreign-exchange trader at PT Bank Resona Perdania in Jakarta. “Investors are still worried about economic growth. Dollar liquidity is still short.”
The rupiah dropped 0.7% to 11,755 per dollar as of 12:47 p.m. in Jakarta, approaching a two-month low, according to data compiled by Bloomberg. Korea’s won fell 0.3% to 1,381.80, according to Seoul Money Brokerage Services Ltd., while Vietnam’s dong dropped to near a record low of 17,488.50.
Bank Indonesia Governor Boediono said yesterday the central bank is also seeking new pacts to help stem a 7% slide in the rupiah this year, following a 16 percent loss in 2008, the most since 2000. The country’s reserves fell 9.3% to $51.64 billion last year, the first annual drop since 2005.
Emerging Currencies
The rupiah led declines among emerging-market currencies, followed by a 0.9% loss in the Slovakian koruna and a 0.8% drop in the Bulgarian lev. The Russian ruble was down 0.5% after Fitch cut the nation’s credit rating by one level to BBB, the second-lowest investment grade.
“Russia’s downgrade will definitely affect the rupiah and other emerging markets,” said Sulastomo Yuriadi, head of trading at ANZ Panin Bank in Jakarta.
Demand for riskier emerging-market assets, exports and foreign direct investment is falling as the global recession takes hold. The ICE’s Dollar Index, which tracks the greenback against six major trading partners, is up 5% this year compared with a 6% gain for all of 2008.
The dong declined for a third day this week as the Saigon Giai Phong newspaper reported Feb. 3, citing the Ministry of Planning and Investment, that pledges of foreign direct investment in January dropped 88% to $200 million from a year earlier. Exports slumped 24% last month to $3.8 billion, the statistics office said Jan. 22.
Dollar Supply
“Demand for the dollar outpaces supply at the moment as exports and foreign direct investment, the nation’s main sources of the dollar, slumped,” said Vu Thu Ha, a currency dealer at Vietnam International Bank.
The euro weakened to $1.2825 from $1.2849 on concern the economic slump in Eastern Europe will deepen the recession in the 16-nation region. The yen advanced for a fifth day, the longest winning streak in four months, on speculation investors will sell overseas assets and bring funds home as Japan’s March 31 fiscal year-end approaches.
Korea’s currency fell after MoneyToday said the Bank of Korea cut its economic growth forecast for 2009 to 0.3% from 2%.
“The economy is shrinking at a rapid pace due to deteriorating global economies,” the Ministry of Strategy and Finance said in its monthly report released today in Gwacheon. “The danger of a slump is expanding as production, domestic demand, exports all shrink further.”
Korea Slowdown
The Bank of Korea plans to announce its revised growth estimate in April, said MoneyToday, the Korean-language Internet news provider. The economy may shrink 7% this year, CLSA Asia Pacific Markets said in a report yesterday as trade dwindles.
“There are renewed concerns over a deterioration in corporate earnings and the economy,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “A rapid decline in the won may be limited as exporters tend to settle deals near 1,400.”
Elsewhere, the Singapore dollar was little changed at S$1.5087. The Malaysian ringgit rose 0.2 percent to 3.6202 from 3.6260. The Philippine peso advanced 0.3% to 47.39 and China’s yuan was unchanged at 6.8343 per dollar. (Bloomberg)
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