Asian Currencies: Philippine Peso, Malaysia's Ringgit Gain

By Lilian Karunungan and Karl Lester M. Yap

July 21 (Bloomberg) -- The Philippine peso rose, leading gains in Asian currencies, as crude-oil costs near a six-week low helped cool demand for dollars to pay the nation's fuel bill. The Malaysian ringgit also advanced.

The peso rose for a third day after the oil price had its biggest weekly fall in more than three years, reducing import costs for the Philippines which buys almost all its energy needs overseas. The currency traded near the highest in four weeks as investors were lured to the nation's assets after the central bank on July 17 raised its benchmark interest rate by more than economists expected.

``Oil prices heading lower are giving support to the peso,'' said Jonathan Ravelas, an economist at Banco de Oro Unibank in Manila.

The peso rose 0.2 percent to 44.387 per dollar as of 12:26 p.m. in Manila, extending its advance over the past three days to 2.5 percent, according to Tullett Prebon Plc. The ringgit traded at 3.2365 per dollar versus 3.2413 on July 18, according to data compiled by Bloomberg.

Crude oil traded at $129.60 a barrel in after-hours trading on the New York Mercantile Exchange after falling to $128.88 on July 18, the lowest close since June 5. Prices dropped 11 percent last week, the most since December 2004, on concern weaker economic growth will curb demand in the U.S., the world's No. 1 buyer of the fuel.

Remittances to Increase

The Philippine peso may rise 6 percent by year-end as overseas workers send more money home and the central bank raises interest rates, said Jose Sio, chief financial officer at the holding company of billionaire Henry Sy.

The currency will climb as high as 42 per dollar by Dec. 31, said Sio at SM Investments Corp., which owns the Philippines' largest shopping mall operator and its second-biggest local bank. He said that was his own personal forecast. The bank has branches in malls handling some of the $1.4 billion in monthly remittances to the nation from workers abroad.

Malaysia's ringgit rose on speculation the central bank will boost interest rates for the first time since April 2006 to temper inflation in Southeast Asia's third-largest economy.

The ringgit snapped a three-day losing streak before a government report on July 23 that will show inflation accelerated to 6.6 percent last month, the fastest since at least 1995, according to economists in a Bloomberg News survey. Bank Negara Malaysia will raise its policy rate by a quarter percentage point to 3.75 percent on July 25, a separate survey shows.

Negative Interest Rate

``The real interest-rate is already in negative territory and Malaysia needs to take decisive action to hold down inflation expectations,'' said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. A rate increase ``will certainly provide some support for the currency.''

The ringgit has advanced 1 percent this month, the third- best among Asia's 10 most-traded currencies outside Japan.

The central bank will raise the overnight policy rate to 3.75 percent, after holding it at 3.5 percent in 17 meetings since April 2006, according to the median forecast of 16 economists in a Bloomberg News survey. Eight analysts forecast a 0.25 percentage point increase, one expected a 0.5 percentage point gain and the remaining seven didn't expect any change.

Malaysia and South Korea's central banks have maintained borrowing costs this year, while Indonesia, Thailand, India and the Philippines have raised them after consumer prices in the region rose at the fastest pace in more than a decade.

Indonesian Rupiah

Indonesia's rupiah halted three days of declines on speculation the central bank is seeking a stronger currency to temper inflation.

The rupiah is the second-best performer over the past month among the 10 most-active Asian currencies. Bank Indonesia boosted its benchmark interest rate three times this year as inflation quickened to a 21-month high of 11 percent in June. Central bank Deputy Governor Hartadi Sarwono said on July 11 the central bank ``supports a stronger rupiah.''

The central bank ``wants a stronger rupiah to help on the inflation front,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. ``Definitely, the main thing for them is they don't want too much volatility.''

The currency traded at 9,145 in Jakarta, compared with 9,152 on July 18, according to data compiled by Bloomberg.

The central bank will likely sell dollars should the rupiah decline to 9,150, said Cahyadi, who forecasts the rupiah will trade between 9,125 and 9,150 today.

Bank Indonesia increased borrowing costs by a total of 75 basis points to 8.75 percent this year.

Elsewhere, the Singapore dollar rose 0.1 percent to S$1.3512 against the U.S. currency. The Thai baht was little changed at 33.35 while the Korean won fell 0.1 percent to 1,015.25. Taiwan's dollar was little changed at NT$30.347 and Vietnam's dong was at 16,770 versus 16,795 on July 18.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Karl Lester M. Yap in Manila at kyap5@bloomberg.net.