Asian Currencies Rise: Baht Gains on Rate Outlook, U.S. Concern

By Aaron Pan and Shanthy Nambiar

July 15 (Bloomberg) -- Asian currencies rose, led by the Thai baht on speculation the central bank will raise interest rates tomorrow to damp inflation.

The baht rose the most in a week against the dollar, which fell against seven out of the 10 most-traded Asian currencies outside of Japan on concern U.S. credit-market losses will worsen. The Bank of Thailand will increase the one-day bond repurchase rate for the first time in two years tomorrow, economists predict.

The local currency ``is taking its cues from the dollar, and there is a bit of consolidating,'' said Carl Rajoo, a regional Asian economist at Forecast Singapore Pte. ``The Bank of Thailand is hawkish on inflation. If the rate hike is in line with expectations, the baht will continue to consolidate.''

The Thai currency gained 0.6 percent to 33.47 per dollar as of 11:17 a.m. in Bangkok, according to data compiled by Bloomberg.

The Bank of Thailand has held its benchmark interest rate at 3.25 percent since August and last increased it in June 2006. Policy makers are expected to raise the rate by a quarter- percentage point tomorrow to 3.5 percent, according to 16 of 19 economists surveyed by Bloomberg News. The remaining three predict a half-point increase.

Expectations of higher interest rates also helped support Indonesia's rupiah, which reached 9,099 per dollar, its strongest since March 10. The local currency traded at 9,123 per dollar, compared with 9,156 yesterday, according to data compiled by Bloomberg.

Stronger Rupiah

``We could see the currency continuing to strengthen gradually,'' said Christy Tan, a senior currency strategist at Bank of America Corp. in Singapore. ``The central bank's monetary tightening efforts started ahead of the others and there's prospects of them staying on this path longer than others in the region.''

Bank Indonesia raised its benchmark interest rate for the third straight month on July 3 to slow inflation, which is at a 21-month high of 11 percent. The central bank said last week it will use ``all instruments'' to slow price gains. The rupiah also gained today as Bisnis Indonesia reported foreign direct investment in the six months to June more than doubled from the same period last year.

U.S. Credit Crisis

Malaysia's ringgit reached a six-week high and Singapore's dollar advanced on speculation investors will steer more funds into Asian assets as U.S. credit-market losses swell. U.S. stocks slumped yesterday, led by financial shares, on concern the nation's regional banks are short of capital.

``What's happening in the U.S. could sway more funds into the Asian markets and that's good for regional currencies,'' said Awaluddin Shariff, a foreign-exchange trader at EON Bank Bhd. in Kuala Lumpur. ``There are concerns about U.S. banks and stock market.''

The ringgit traded at 3.2148 per dollar versus 3.2300 late yesterday, according to data compiled by Bloomberg. The intra- day high of 3.2130 per dollar is the ringgit's highest level since June 2. The currency may reach as high as 3.21 today, Awaluddin said.

Singapore's dollar added 0.6 percent to S$1.3483, Vietnam's dong was little changed at 16,834 per dollar and Taiwan's dollar was also little changed, trading at NT$30.412. The South Korean won fell 0.1 percent to 1,005.90.

The U.S. Treasury and the Federal Reserve on July 13 announced a rescue plan for Fannie Mae and Freddie Mac, the two- largest buyers of home loans, to help restore confidence after their share prices tumbled almost 50 percent last week. The stocks extended their slide yesterday. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will later today address U.S. lawmakers on their response to the credit crisis.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net.