Asian Currencies: Ringgit Leads Gains; Korean Won Snaps Advance

By Lilian Karunungan and David Yong

July 14 (Bloomberg) -- Malaysia's ringgit rose, leading gains in Asian currencies, on speculation widening credit-market losses in the world's biggest economy will prompt investors to shun the dollar. The South Korean won fell.

The ringgit traded at the strongest in more than three weeks against the dollar after U.S. shares fell for a sixth week as fuel prices climbed to a record. U.S. Treasury Secretary Henry Paulson asked the Congress for authority to buy unlimited stakes in Fannie Mae and Freddie Mac, which finance almost half of the $12 trillion of U.S. mortgages, after the companies lost about half their value last week.

``The U.S. dollar is in a weak environment with seemingly endless problems in the financial system and that's supporting the ringgit,'' said Nor Alfian Din, a senior currency trader at Maybank Islamic Bhd. in Kuala Lumpur. ``People are looking for safe-haven currencies'' with strong fundamentals, he said.

The ringgit rose 0.3 percent to 3.2360 per dollar as of 11:50 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier climbed to 3.2330, the strongest level since June 18. South Korea's currency fell to 1,004.80 in Seoul, compared with 1,002.30 at the end of last week, according to Seoul Money Brokerage Services Ltd.

The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77 today, the weakest since April 23. The index, down 6 percent this year, declined to 70.70 on March 17, the lowest since it was first compiled in 1973.

Intervention

The ringgit also advanced on speculation Asian central banks will prefer stronger local currencies to help stem inflation after crude oil rose to a record $147.27 a barrel on July 11, Alfian said.

South Korea's won declined, following its biggest weekly gain in a decade, as oil prices above $140 a barrel and sales of local shares by global funds bolstered demand for the dollar.

The currency advanced 4.8 percent last week, spurred by speculation the government will intervene to support the won and temper the fastest inflation in 10 years. President Lee Myung Bak vowed last week to ``get rid of factors'' in the foreign- exchange market that are pushing up consumer prices.

``High oil prices'' are exerting pressure on the won to weaken, said Park Haeil, an options trader at Shinhan Bank in Seoul. ``Still, market participants stayed on the lookout for government intervention.''

The won's gain last week was the biggest since March 1998, helping trim this year's loss to 6.6 percent.

Selling Stocks

Investors abroad sold Korean shares today, the 26th consecutive day they have offloaded more equities than they bought, according to stock exchange data.

Finance Minister Kang Man Soo last week pledged that the government will tackle risks stemming from oil costs and inflation. Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.'' Central banks intervene by buying or selling currencies.

Indonesia's rupiah held near its highest level against the dollar in more than three months on speculation the central bank will seek a stronger currency and higher interest rates to curb inflation.

The central bank has raised interest rates three times this year to 8.75 percent as inflation accelerated to a 21-month high following a 30 percent increase in fuel prices in May. The central bank has said that it wants a stronger currency to reinforce its efforts to fight inflation.

Attractive Yields

``Yields are quite attractive and Bank Indonesia has come up to talk about currency strength,'' said Wai Ho Leong, a regional economist at Barclays Capital in Singapore. ``A stable currency and high-yield environment will look quite attractive for the rupiah in the short term.''

The currency rose as high as 9,153 a dollar, the strongest since April 2, before trading at 9,156 in Jakarta, compared with 9,162 on July 11, according to data compiled by Bloomberg. The rupiah is the third-best performer in the region this month, gaining 0.8 percent against the dollar.

Bank Indonesia Deputy Governor Hartadi Sarwono said on July 11 that the central bank ``supports a stronger rupiah'' and that overseas funds are buying Indonesia's bills and bonds.

Elsewhere, the Singapore dollar rose 0.2 percent to S$1.3558 and the Philippine peso fell 0.3 percent to 45.54, according to Tullett Prebon Plc. The Thai baht was little changed at 33.67. Taiwan's dollar was at 30.40 compared with 30.392 on July 11, while Vietnam's dong was at 16,837.50 versus 16,841.50.

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.