Asian Currencies Fall as Credit Turmoil May Spur Regional Exit

Asian Currencies Fall as Credit Turmoil May Spur Regional Exit

By Jake Lee

Sept. 18 (Bloomberg) -- The Singapore dollar and Malaysian ringgit touched the lowest in almost a week on speculation investors will cut holdings of riskier assets as the credit- market turmoil spreads.

Thirteen currencies of Asia's 17 biggest economies fell as a cash injection by the Bank of England into the U.K.'s Northern Rock Plc prompted a run on deposits by savers. E*Trade Financial Corp., a New York-based online brokerage, cut its profit forecast because it expects losses on housing loans and Bank of America Corp. warned market turmoil will effect earnings.

``Investor confidence is deteriorating and that works to the detriment of Asian currencies,'' said David Cohen, an economist at Action Economics in Singapore. ``There's a flight to safety, which is going to benefit the U.S. dollar and the Japanese yen.''

The Singapore dollar declined 0.1 percent to S$1.5174 per U.S. dollar as of 12 p.m. local time, and the ringgit slipped as much as 0.2 percent to 3.4960, both the weakest since Sept. 12. The yen rose against 15 of the world's 16 most-active currencies.

Shares in the region dropped following declines in the U.S. The Morgan Stanley Capital International Asia-Pacific Index fell 1.3 percent, the most since Sept. 10.

Overseas investors sold more South Korean stocks than they bought today and shed shares in Taiwan, the Philippines and Thailand yesterday. Korea's won weakened 0.1 percent to 929.80 against the dollar, according to Seoul Money Brokerage Services Ltd.

``When a crisis comes there's a tendency for individuals to veer away from Asian currencies and to hold on to dollars as a safe haven,'' said Jonathan Ravelas, a strategist at BDO Unibank in Manila.

Fed Meeting

The Federal Reserve's decision on interest rates today may paint a clearer picture as to the extent of the credit meltdown and the outlook for Asian exports.

Traders see a 50 percent chance the Fed will lower its overnight rate for loans between banks by 50 basis points to 4.75 percent today, according to interest-rate futures, versus 72 percent a week ago.

The Indonesia rupiah weakened 0.1 percent to 9,391 per dollar. Bank Indonesia Governor Burhanuddin Abdullah yesterday said the central bank has room to cut interest rates should the U.S. reduce borrowing costs. The local central bank kept its reference rate on hold at 8.25 percent at its past two meetings.

``The timing for further movement in the currency hinges on international conditions,'' said Lawrence Goodman, emerging- market currency strategist at Bank of America based in New York. ``In the near term, we will remain in an environment of risk and uncertainty.''

Elsewhere, Taiwan markets were closed as supertyphoon Wipha approached the north of the island. The Vietnamese dong was little changed at 16,225 and the Thai baht onshore was 34.28.