Asian Currencies: Philippine Peso Surges, Korea's Won Declines

By Aaron Pan and Lilian Karunungan

July 17 (Bloomberg) -- The Philippine peso led gains amongst Asian currencies, as the biggest two-day decline in oil prices since January 2007 stoked speculation demand for dollars to finance fuel imports will cool.

The peso was the biggest gainer of the 10 most-active Asian currencies outside Japan as regional stocks advanced for the first time this week, buoyed by a rally in U.S. shares. Oil prices fell 7.3 percent in the past two days, reducing import costs for regional economies such as the Philippines, Taiwan and Thailand that buy almost all of the fuel they need from abroad.

``Lower crude-oil prices raise appetite for some more risk in the portfolios'' of overseas investors, said Joey Cuyegkeng, an economist at ING Bank in Manila. ``The peso takes its cue from what happens to crude oil prices and the U.S. stock market.''

The currency rose 1.1 percent to 45.025 per dollar as of 4:23 p.m. in Manila, according to Tullett Prebon Plc. That's the sharpest gain since November. The peso may strengthen to 44 by year-end as remittances from Filipinos working overseas increase and oil prices fall due to slowing U.S. demand, Cuyegkeng said.

Taiwan's dollar rose 0.1 percent to NT$30.359 per dollar, while the baht climbed 0.1 percent to 33.46. Indonesia's rupiah slid 0.1 percent to 9,150, Singapore's dollar declined 0.2 percent to S$1.3511 and Vietnam's dong held at 16,820.

South Korea's won led declines in the region. The currency dropped for a fourth day, the longest losing stretch in two months, as overseas funds cut their holdings of the country's equities, increasing demand for the dollar.

Korean Intervention

The currency has fallen 9.3 percent over the past year, the worst performer among the world's 16 most-active currencies. The Ministry of Finance and central bank spent as much as $7 billion supporting the won on July 9 to stem the currency's slide, according to Industrial Bank of Korea, spurring a gain of as much as 3.6 percent.

The currency declined 0.4 percent to 1,012.80 per dollar at the local close in Seoul, from 1,009.30 yesterday, according to Seoul Money Brokerage Services Ltd.

``Importers' purchases of the dollar and foreign investors selling local shares have limited the strength in the won,'' said Ko Yun Jin, a foreign-exchange dealer at Kookmin Bank in Seoul, the country's largest lender.

Fund managers overseas sold more local shares than they bought every day since June 5, according to Korea Exchange. Vice Finance Minister Kim Dong Soo said on July 15 that consumer prices may become more unstable in the second half of this year.

Anwar Arrest

Malaysia's ringgit declined, erasing earlier gains, on concern political jitters will cause the central bank to delay raising interest rates amid accelerating inflation.

The currency yesterday fell from a six-week high after police arrested opposition leader Anwar Ibrahim on allegations he had sex with a male aide, triggering a demonstration by his supporters. Economists predict a government report next week will show consumer prices rose last month at the fastest pace in a decade.

The ringgit fell 0.2 percent to 3.2335 per dollar from 3.2275 yesterday, according to data compiled by Bloomberg. It earlier rose as high as 3.2197.

``The prospect for the ringgit may not be so great with the political drawback,'' said Joanna Tan, an economist and currency strategist at Forecast Singapore Pte. ``The central bank also risks being way behind the curve if it doesn't raise interest rates this month.''

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.