Asian Currencies Set for Weekly Gain, Led by South Korea's Won

By Aaron Pan and Kim Kyoungwha

July 11 (Bloomberg) -- Asian currencies headed for a weekly gain, led by South Korea's won as policy makers there pledged to shore up the local currency and tame inflation.

The won's 4.7 percent gain this week, the most since March 1998, makes it the world's best performer. Finance Minister Kang Man Soo yesterday announced the government will tackle risks stemming from oil costs and inflation, while Bank of Korea Governor Lee Seong Tae said the bank may intervene if necessary because the currency market ``overreacts.'' Six out of the 10 most-traded currencies in Asia outside of Japan rose this week.

``Few market participants are willing to run counter to the government that remains so steadfast in stopping the dollar's ascent,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``Still, there's pent-up demand for the dollar from importers in need of settlements.''

South Korea's currency traded at 1,001.60 against the dollar at 12:26 p.m. in Seoul, from 1,002.90 yesterday, according to Seoul Money Brokerage Services Ltd. The weekly advance trims its loss this year to 7 percent.

The currency rallied this week as President Lee Myung-Bak dismissed the nation's currency policy chief, signaling the end of his support for a weaker won. Industrial Bank of Korea estimated the government sold as much as $7 billion on July 9 alone to shore up the won.

Elsewhere, the Singapore dollar added 0.2 percent this week to S$1.3604, Indonesia's rupiah advanced 0.5 percent to 9,164 and Vietnam's dong rose 0.2 percent to 16,821.50.

Malaysia's Ringgit

Malaysia's ringgit climbed on speculation investors will shun the U.S. currency as the prospect of widening credit-market losses gives the Federal Reserve less room to raise interest rates. The two largest buyers of U.S. home loans, Fannie Mae and Freddie Mac, may need to be bailed out, former St. Louis Fed President William Poole said this week.

The ringgit headed for its first weekly gain in three after U.S. stocks entered a bear market this week for the first time since 2002. Six of Asia's 10 most-traded currencies climbed this week after traders said central banks from South Korea to Malaysia bought their own currencies to help stem inflation.

``The dollar is on a weak footing and the flows are slowly coming for the ringgit,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``Asia's inflation is still a problem and the authorities are looking for currency strength to soak up the price pressure.''

The ringgit traded at 3.2455 per dollar compared with 3.2465 late yesterday, according to data compiled by Bloomberg. The currency has risen 0.7 percent this week.

Philippine Peso

The Philippine peso headed for a third week of declines on speculation higher oil costs will stoke inflation and spur demand for the U.S. currency to meet the cost of fuel imports.

The peso, the worst performer of the past three months among the 10 most-active Asian currencies excluding the yen, fell after crude oil rose 4 percent yesterday. The Philippines imports almost all of the oil it needs and the cost of these purchases jumped 58 percent in the first four months of the year, official figures show. Inflation in the Southeast Asian nation accelerated to a 14-year high of 11.4 percent in June.

``Because of the Philippines dependency on imports, it's been performing worse'' than most currencies in the region as higher oil prices boost demand for dollars, said Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong. While ``others have come out strongly to defend their currencies, this seems to be lacking in the Philippines,'' he said.

The currency fell 0.5 percent to 45.820, according to Tullett Prebon Plc. It's set for a 1 percent drop this week.

Taiwan's dollar slid 0.1 percent to NT$30.427 this week and Thailand's baht declined 0.7 percent to 33.73.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.