Sat, May 24, 2008 page11

• Asian currencies weaker on concerns over inflation

  RECORD OIL PRICES Indonesia and Malaysia both announced on Thursday that local fuel prices would be increased to reduce the amount spent on subsidies

  • BLOOMBERG
  • • 
    • 
    • 

  The Philippine peso fell this week by the most in two months, leading losses among Asian currencies, on concern that record oil prices would quicken inflation and slow economic growth.

  The peso slid for a sixth week after Economic Planning Secretary Augusto Santos said on Thursday that GDP growth in the first quarter probably slowed to as little as 5.2 percent because inflation at a three-year high restrained consumer spending. Oil prices reached US$135.09 yesterday, double what they were a year ago. South Korea’s won and Indonesia’s rupiah also slumped on demand for US dollars to fund oil imports.

  “Inflation is definitely weighing on the economic outlook, not just in the first quarter but for the rest of the year,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “That’s adding to the peso’s weakness.”

  The peso fell 1.5 percent this week to 43.465 per US dollar as at 5pm in Manila, the Bankers Association of the Philippines said, the most since the five days ended March 14. The won dropped 0.7 percent to 1,047.65 per US dollar and the rupiah declined for a third week, to 9,313 per US dollar.

  The Philippine economy may grow 6 percent in the first quarter, the slowest pace in six quarters, a survey compiled by Bloomberg News showed before a government report on May 29. Growth was 7.4 percent in the final quarter of last year.

  Central bank Deputy Governor Diwa Guinigundo said on Thursday that the economy “will definitely suffer” if oil prices remain above US$125 a barrel. The country imports almost all of its domestic fuel needs.

  South Korea’s won fell to 1,057.40 per US dollar on Wednesday, the lowest since October 2005, on concern oil prices will increase the nation’s import bill and slow economic growth. South Korea imports almost all of its oil needs and reported a fourth consecutive current account deficit in March.

  “The driving force of the won’s weakness is oil,” said Kim Hee, a currency dealer at the state-run Korea Development Bank in Seoul. “The market has received hefty orders from importers” to settle deals in the US dollar.

  Asia’s fourth-largest economy faces difficulties, including the recent surge in oil and raw material costs, Vice Finance Minister Choi Joong-kyung said in Seoul yesterday.

  The economy will grow less than the central bank’s forecast of 4.7 percent because of higher oil costs and a global slowdown, Bank of Korea Deputy Governor Kim Byung-hwa said.

  Indonesia’s rupiah fell after Energy Minister Purnomo Yusgiantoro said on Thursday that the government would raise domestic fuel prices by an average 29 percent to reduce its subsidies, prompting protests from students and labor unions.

  Malaysia’s ringgit pared a weekly gain after the government said it would also cut subsidies.

  “Investors are worried about the inflation outlook, which is why the Indonesian rupiah is weak,” said Goh Puay Yeong, a currency strategist in Singapore at Barclays Capital.

  Malaysia plans to reduce fuel subsidies within two months, Second Finance Minister Nor Mohamed Yakcop said on Thursday.

  “The risk to the ringgit and other regional currencies is the spike in inflation from the withdrawal of fuel subsidies,” said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd in Kuala Lumpur.

  The ringgit traded at 3.2175 per US dollar in Kuala Lumpur for a 0.5 percent gain on the week.
• Most Popular

  • 1

    Chinese ships expelled from near Pratas Island

  • 2

    Taiwan to lose 6.67m workers in two retirement waves

  • 3

    ‘Fujian’ carrier to pose steep defense challenge

  • 4

    Two tropical depressions form, one typhoon forecast

  • 5

    AIT comments on Taiwan accurate: State Department