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Asian currencies decline as central banks might sell

The South Korean won, Singapore dollar and Thai baht posted weekly declines on concern Asian central banks will sell their currencies to bolster export-led economic growth.

"We will take steps to stabilize the market if necessary," South Korea's finance ministry said in a statement yesterday, citing concern about "excessive" gains in its currency. The remark came a day after Singapore's government said Asian central banks will act to halt a "sharp" slide in the US dollar, which makes the region's exports more expensive for overseas consumers.

Asian central banks "don't want a violent drop in the dollar," said Chan Cheh Shin, who helps invest the US$3.7 billion that DBS Asset Management (Singapore) Ltd. oversees globally.

slow down pace

"They want to slow down the pace of Asian currency gains." Chan increased his dollar holdings by about 2 percent last week.

The won slid 0.8 percent to 1,176.05 against the dollar this week, according to Seoul Money Brokerage Services Ltd. The Singapore dollar dropped 0.8 percent to S$1.7004 this week. The Taiwan dollar fell 0.4 percent to NT$33.365 during the five trading days, according to Taipei Forex Inc.

For the week, the Thai baht weakened 0.3 percent to 39.25 and the Indonesian rupiah fell 0.2 percent to 8,454, while the Indian rupee was little changed at 45.2475. The Philippine peso closed at 56.335, little changed this week, according to Bankers Association of the Philippines.

"We expect Asian central banks to intervene heavily" to support the US dollar, Friedrich Wu, director of Singapore's Ministry of Trade and Industry economics division, said on Thursday. Regional economies are "dependent on exports," he said.

overseas sales

Overseas sales make up about 40 percent of gross domestic product in South Korea and the Philippines. Exports account for more then 50 percent of Singapore's economy and about half of Taiwan and Thailand's gross domestic product.

Asian currencies have risen this year because of demand for the region's assets from global fund managers, DBS's Chan said.

International investors bought a net US$1.2 billion of South Korean equities this month through Thursday, and a net US$772 million of Taiwan shares, according to Bloomberg data.

South Korea posted its eighth current-account surplus in December, the Bank of Korea said on Thursday.

The surplus represents the flow of goods, services and money into the country, which may strengthen the currency.

Taiwan's surplus was little changed, near a record, in the fourth quarter, according to the central bank.

Investment in Asian currencies may slow after the Singapore government commented that central banks will sell, said Tee Ah Heng, a fixed-income and treasury-sales director at SG Singapore, a branch of Societe Generale SA, France's third-biggest bank.
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