Dec. 27 (Bloomberg) -- The Indonesian rupiah and Thai baht dropped against the dollar on concern the world's most powerful earthquake in 40 years will slow tourism and economic growth.

``We cannot yet determine the economic loss of the disaster -- for sure it's going to be huge,'' Doti Indrasanto, head of the Center for Health Emergency Preparedness and Response at the health ministry, said in a phone interview from Palembang, in South Sumatra. President Susilo Bambang Yudhoyono has declared a national disaster.

The Indonesian rupiah weakened as much as 0.6 percent, the biggest drop since Dec. 10, before trading down 0.3 percent at 9,301 against the dollar at 1:25 p.m. local time. The Thai baht dropped 0.2 percent against the dollar to 39.09.

Tourism accounts for more than 6 percent of Thailand's economy. The tsunamis triggered by the quake may have caused 10 billion baht ($256 million) of damage at Phuket's Patong beach, the Business Day reported, without saying where it obtained the information.

``Thailand's economy will probably be badly hit because the disaster hurt its tourism,'' said Benjamin Widjaja, a currency trader in Jakarta at PT Bank Mizuho Indonesia. ``The rupiah is weakening more because it tracks other currencies in the region, like the baht.''

Elsewhere in Asia, the Singapore dollar fell 0.1 percent to S$1.6423 and the Taiwan dollar was little changed at NT$32.196.

`Undervalued'

Asian stocks dropped. Thailand's SET Index fell as much as 2.2 percent, while Malaysia's Kuala Lumpur Composite Index dropped as much as 0.6 percent. Sri Lanka, where the death toll exceeded 5,000, suspended trading for the day.

The rupiah's decline ``will be temporary,'' said Aslim Tadjuddin, deputy governor for monetary policy at the central bank.

``Looking at the macro economic condition, the rupiah at current levels is undervalued,'' Tadjuddin said in an interview in Jakarta. ``The rupiah fundamentally should be stronger than 9,000 to the dollar.''

Indonesian Trade Minister Mari Pangestu said there was no reason to revise economic growth forecasts. ``We are reasonably optimistic we can reach past the growth of slightly higher than 5 percent,'' Pangestu said in an interview. ``We are realistic about the possibility of investment inflows.''

`Selling Pressure'

The magnitude 9.0 quake, centered 1,605 kilometers (997 miles) northwest of Jakarta at a depth of 10 kilometers, struck at 7 a.m. local time yesterday, the U.S. Geological Survey said. The temblor, the fourth largest in the world since 1900, triggered aftershocks, unleashing tsunamis in Indonesia, India, Sri Lanka and other parts of Southeast Asia.

TUI AG, Europe's largest tour operator, is canceling flights to Thailand's Phuket as well as Sri Lanka and the Maldives until Dec. 31, Anja Braun, a spokeswoman, said yesterday.

``The Thai baht is under selling pressure on concern the tsunami will have a negative impact on the tourism industry,'' said Takashi Yano, vice president of the derivatives and foreign exchange marketing department in Tokyo at UFJ Bank Ltd., a unit of Japan's fourth-biggest lender. ``Thailand has been promoting tourism.'' The baht may fall to around 39.20 against the dollar today, Yano said.

Not Over

In Indonesia, the number of travelers arriving in the country, where 8 million people work in the tourism industry, rose 25 percent to 3.79 million in the first 10 months of this year, the statistics bureau said on Dec. 1.

``This disaster is causing concern that their economies, including tourism, will slow, leading to a sell-off of their currencies,'' said Osamu Takashima, chief analyst at the foreign exchange and treasury division in Tokyo at Bank of Tokyo- Mitsubishi Ltd., a unit of Japan's second-biggest lender. The baht may fall to around 39.40 against the dollar and rupiah to about 9,350 today, Takashima said.

India's rupee declined 0.1 percent to 43.85 against the dollar.

In India, at least 4,278 people have died in India, Agence France-Presse said, citing Press Trust of India reports and figures compiled from police and officials.

The threat isn't over, officials said.

``We expect the big waves to lash Chennai and parts of Tamil Nadu for the next two days,'' A.K. Shukla, head of the Indian Meteorological Department, said in an interview from New Delhi.

To contact the reporter on this story: Yumi Kuramitsu ykuramitsu@bloomberg.net

Last Updated: December 27, 2004 01:31 EST