Asian currencies fell this week, led by South Korea’s won, as global funds trimmed holdings of regional shares on concern economic growth and corporate earnings will be hurt by interest-rate increases. Overseas investors pulled $2.5 billion from stock markets in South Korea, Taiwan and Thailand in the last four days, exchange data show. China’s central bank raised interest rates this week for the third time in four months, joining India, Indonesia, South Korea and Thailand in having boosted borrowing costs this year to tame inflation. Vietnam devalued the dong by about 7 percent today, the most since at least 1993, to help rein in the nation’s trade deficit. “What’s been driving currencies lower in Asia is a bit of a sell-off in equity markets, reflecting concerns of tightening policy and rising inflation,” said Brian Jackson, a Hong Kong- based senior strategist at Royal Bank of Canada. “People are focusing on higher interest rates making it difficult for some companies to borrow and this leads to lower equities and a weaker currency.” The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, fell 0.3 percent from a week ago to 116.08 as of 11:26 a.m. in Hong Kong. The won slumped 1.5 percent to 1,119.55 per dollar and the Singapore dollar slid 0.4 percent to S$1.2796, according to data compiled by Bloomberg. Malaysia’s ringgit slipped 0.1 percent to 3.0449. Surprise Rate Decision The won touched this month’s low of 1,122.90 today after the Bank of Korea reported producer-price inflation accelerated to a two-year high of 6.2 percent in January and unexpectedly held off from raising interest rates. Nine of 12 economists surveyed by Bloomberg forecast the seven-day repurchase rate would be raised by a quarter of a percentage point from its current level of 2.75 percent. Three predicted no change. “Markets don’t like monetary-policy surprises and this was a surprise,” said Tim Condon, the head of Asian research in Singapore at ING Groep NV, the largest Dutch financial services company. “Most people were anticipating a rate hike. Korea has an inflation problem.” The ringgit retreated from a 13-year high of 3.0290 per dollar recorded on Feb. 4 as government data showed industrial output moderated in December. Production gained 4.2 percent from a year earlier, compared with 5.1 percent the previous month. “The market is concerned about the impact of policy tightening in China, with central banks in Southeast Asia likely to follow suit,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “Fund repatriation out of stock markets has been a strong factor affecting the ringgit.” Indonesia Growth Indonesia’s rupiah strengthened 0.7 percent this week to 8,928 per dollar, poised for its biggest gain since July, after the government reported the fastest economic growth in six years. Gross domestic product rose 6.9 percent from a year earlier in the fourth quarter, the most since 2004. Elsewhere, the Philippine peso advanced 0.2 percent to 43.662 per dollar and Taiwan’s dollar gained 0.4 percent to NT$29.097. China’s yuan was little changed at 6.5955 and India’s rupee declined 0.3 percent to 45.73. To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Patricia Lui at plui4@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

Source