Asian Currencies: Peso, Won Advance on Oil Decline, Yuan Drops

By David Yong and Francisco Alcuaz Jr.

July 30 (Bloomberg) -- The Philippine peso led gains among Asian currencies after crude oil prices fell to a 12-week low, raising speculation demand for dollars will wane from importers and inflation will ease from near a 14-year high.

The currency gained the most in a week after crude oil dropped 2 percent to $122.19 a barrel yesterday on the New York Mercantile Exchange, rounding out a 17 percent decline from its July 11 record of $147.27. China's yuan was the worst performer among the 11 most-traded currencies in the region on speculation the government will slow its gain to bolster exports.

``Everyone is looking for oil to go lower on reports of a reduction in travel,'' said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking Corp. in Manila. ``There'll be less demand for dollars.'' Lower oil ``will also help cushion inflation'' and support the peso.

The peso rose 0.6 percent to 44.135 per U.S. dollar at 11:57 a.m. in Manila, according to Tullett Prebon Plc, its biggest gain since July 23. The yuan fell to 6.8347 from 6.8264, putting this month's 0.3 percent advance at the slowest since March 2007, according to data compiled by Bloomberg.

The Philippines buys almost all its crude from abroad. The value of oil imports rose 64.5 percent in the first five months of the year, according to government data. A U.S. government report today may show gasoline supplies rose for a fifth week, according to a Bloomberg News survey of analysts.

Yuan, Ringgit

China's yuan extended a decline after the Politburo, the Communist Party's top decision-making body, said on July 25 that maintaining growth and fighting inflation are the country's top priorities.

``The government will slow the yuan's appreciation, especially in the fourth quarter,'' said Li Tao, a foreign- exchange trader at Shenzhen Development Bank Co. in Shenzhen. ``Exporters are having a hard time because of the currency appreciation.''

The People's Bank of China today set the reference rate for yuan trading above 6.83 against the dollar for the first time in more than two weeks. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the reference rate.

Malaysia's ringgit weakened on speculation economic growth will cool, reducing demand for the nation's exports. Reports this month showed Singapore's exports slumped for a second month in June and Japan's industrial production fell more than expected.

The currency traded at 3.2630 per dollar, versus 3.2622 yesterday. Bank Negara Malaysia on July 25 left its overnight rate at 3.5 percent, unchanged since April 2006 on concern that growth will ease and unemployment will rise.

`Level of Comfort'

``It would gel with their priority of sustaining the growth momentum, even if the ringgit goes down to the softer side,'' said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. ``There should still be some level of comfort in the exchange rate before it goes to 3.28, though not in one day.''

The Singapore dollar fell 0.3 percent to S$1.3672 against the U.S. currency. The local dollar has dropped 0.5 percent this month, leading losses among the 10 most-traded currencies in Asia outside Japan.

Elsewhere, South Korea's won traded at 1,008.35 versus 1,008.75 and Vietnam's dong gained 0.2 percent to 16,760. Thailand's baht was little changed at 33.5 per dollar and the Taiwan dollar declined 0.1 percent to NT$30.487.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net.