Asian Currencies: Korean Won Gains on Intervention Speculation

By Aaron Pan and Kim Kyoungwha

July 10 (Bloomberg) -- Asian currencies advanced, led by South Korea's won, on speculation the government is intervening to strengthen the currency and curb inflation.

The won rose for a fourth day as Finance Minister Kang Man Soo pledged again today the government will tackle risks stemming from higher oil costs, accelerating inflation and turmoil in financial markets. The Bank of Korea kept interest rates on hold at 5 percent today. Six of the 10 most-traded Asian currencies outside of Japan rose.

``There's been around-the-clock intervention from the government to propel the won higher,'' said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. ``It's a blanket policy from spot to forward markets.''

South Korea's currency gained 0.5 percent to 999.75 against the dollar as of 1:09 p.m. local time, according to Seoul Money Brokerage Services Ltd. The government's won buying amounted to at least $5 billion yesterday alone, Kim said.

As part of efforts to support the won, South Korea may allow foreign banks operating in the nation to borrow more from overseas and help increase dollar inflows, the Herald Business newspaper reported yesterday.

Elsewhere, the Singapore dollar added 0.2 percent to S$1.3607, the Taiwan dollar was little changed at NT$30.401 and Thailand's baht fell 0.1 percent to 33.67 versus the dollar. Vietnam's dong traded at 16,846.50 from 16,845.50 yesterday.

Indonesia's rupiah advanced to the highest level in three months on speculation the central bank wants a stronger currency to help temper inflation.

`Still Aggressive'

The currency rose 0.5 percent in the past five days as a decline in oil prices from last week's record $145.85 a barrel eased concern that state finances will deteriorate. Bank Indonesia Governor Boediono said yesterday his focus was on maintaining economic stability rather than growth and he would use exchange and interest rates to tame inflation.

``Even if the rupiah is strengthening, our central bank is still aggressive to defend the rupiah, to make the currency stronger,'' said Iwan Ridwan Gunandar, a currency dealer at PT Bank Niaga in Jakarta. ``Government finances will also be better if oil prices go down.''

The currency rose as high as 9,161 per dollar, the strongest since April 8, before trading at 9,167 from 9,173 late yesterday, according to data compiled by Bloomberg. The rupiah may trade between 9,150 and 9,200 today, Gunandar said.

Malaysia's ringgit

Malaysia's ringgit gained as investors shunned the U.S. currency on concern a deepening housing-market slowdown will lead to more losses at mortgage-finance companies.

The ringgit rose for a sixth day after U.S. stocks tumbled yesterday, pushing the Standard & Poor's 500 Index into a bear market for the first time since 2002. The currency also advanced on speculation Asian central banks will buy their currencies, emulating South Korea, to help stem inflation.

``The broad dollar-weakness is coming back again and it's supportive of the ringgit trades,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Korea's moves to intervene are giving some optimism'' that other central banks will do the same, he said.

The ringgit traded at 3.2425 per dollar versus 3.2432 late yesterday, according to data compiled by Bloomberg. The currency may advance to 3.2350 today, Yahya said.

Malaysia's currency is headed for the longest winning streak since April 2007 on speculation Bank Negara will raise its overnight policy rate this month after saying consumer prices may have climbed more than 6 percent in June, the most in 10 years.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.