Asian currencies dropped 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 $3.8 billion from stock markets in South Korea, Taiwan and Thailand during the week, exchange data show. China’s central bank raised interest rates 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 yesterday, 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 during the week. The won slumped 2.2 percent to 1,128.47 per dollar and the Singapore dollar slid 0.9 percent to S$1.2851, according to data compiled by Bloomberg. Malaysia’s ringgit slipped 0.9 percent to 3.0575. Dong Devaluation Vietnam’s dong slid to a record low against the U.S. dollar after the central bank devalued the currency for the fourth time in 15 months. The dong dropped 6.6 percent to 20,875 per dollar yesterday. The State Bank of Vietnam said yesterday that it will fix the reference rate for the currency at 20,693 versus 18,932 on Feb. 10. It also narrowed the trading band to 1 percent on either side of the rate from 3 percent before. The won touched a one-month low of 1,128.70 yesterday 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.” Fund Repatriation 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 a revised 5.4 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’s rupiah strengthened 0.5 percent this week to 8,948 per dollar 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 slid 0.1 percent to 43.815 per dollar and India’s rupee lost 0.2 percent to 45.69. Taiwan’s dollar declined 0.1 percent to NT$29.23, while China’s yuan was little changed at 6.5919. 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

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