Asian currencies weaken as Fed stimulus speculation recedes

Asian currencies fell, led by South Korea’s won, as data pointed to slowing growth in the region and speculation receded that the Federal Reserve will inject more dollars into the financial system.

Reports today showed South Korean consumer confidence dropped to the lowest since March and Philippine imports declined 7.9 percent from a month earlier in June. Better-than expected durable-goods orders and home-price data from the U.S. curbed speculation Fed Chairman Ben S. Bernanke will announce a third round of bond purchases that boost the supply of dollars, known as quantitative easing, when he speaks tomorrow at a symposium at Jackson Hole, Wyoming.

“Expectations for QE3 have been pared down because the recent economic data isn’t conclusive” enough to warrant urgent action, said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. The dollar’s strength “is consistent” with those expectations, he said.

The won weakened 0.5 percent to 1,087.66 per dollar as of the 3 p.m. close in Seoul. Malaysia’s ringgit fell 0.4 percent to 2.9868, Indonesia’s rupiah dropped 0.3 percent to 8,584 and the Singapore dollar declined 0.2 percent to S$1.2078.

Global funds sold $3.7 billion more South Korean, Thai and Indonesian stocks than they bought in the first three days of this week, according to exchange data.

U.S. house prices rose 0.9 percent in June from the month before, the biggest increase since September 2005, a report showed yesterday. Durable-goods orders jumped 4 percent in July from a year earlier, following a revised 1.3 percent contraction the previous month.

UBS AG downgraded its growth and currency forecasts for several Southeast Asian economies, citing the deteriorating global outlook, in a research note released today. It cut its 2011 growth estimate for Thailand to 3.5 percent, from 4.5 percent, and that for Singapore to 4.5 percent from 5.5 percent. The bank lowered its year-end projection for the Thai baht to 31 per dollar from 30, and that for the ringgit to 3.10 from 3.

The won weakened for a second day after the Bank of Korea said today its sentiment index fell to 99 in August from 102 in July. A reading below 100 indicates people are more pessimistic than the average between the first quarter of 1999 and the second quarter of 2008.

“There’s skepticism in the market whether there’s an effective stimulus measure that Bernanke can announce at the meeting,” said Ryoo Hyun Jung, chief currency dealer at Citibank Inc. in Seoul. “This uncertainty is preventing players from taking a strong one-sided position.”

The peso dropped for a second day as the slump in imports fanned concern the nation’s economic outlook is deteriorating. Annual growth rates for imports in May and June were the lowest in a year.

“Imports have been in a decelerating mode,” said Radhika Rao, an economist at Forecast Pte in Singapore. “There’s not much optimism among local manufacturers to step up purchases when you don’t see sustainable end demand. Capital imports have been quite under the weather.”

Elsewhere, the baht and India’s rupee dropped 0.2 percent to 29.98 and 46.0638, respectively. The Taiwan dollar and the Philippine peso weakened 0.1 percent to NT$29.041 and 42.515, respectively, and China’s yuan slipped 0.02 percent to 6.39.