Asian Currencies: Won Leads Gains, Ringgit Rises on Oil Retreat

By David Yong and Judy Chen

July 8 (Bloomberg) -- South Korea's won rose, leading gains in the region, on speculation the government is intervening to strengthen the currency to help slow inflation from the fastest in a decade.

The Ministry of Finance and Bank of Korea yesterday said they may use the nation's $258 billion of foreign-exchange reserves to support the won. The currency has slipped 11 percent in the past year, costing Vice Finance Minister Choi Joong Kyung his job yesterday. Malaysia's ringgit gained as oil prices retreated from a record.

``Interventions are possible this week,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul, the country's largest lender to small and medium-sized companies. ``But the interventions cannot change the market trend as there's huge demand for the dollar.''

Korea's currency advanced 1.2 percent to 1,030 against the dollar as of 12:33 p.m. in Seoul, from 1,043 yesterday, according to Seoul Money Brokerage Services Ltd. The ringgit rose for a fourth day, adding 0.1 percent to 3.2630 per dollar.

South Korea reversed its weaker-won policy as record oil prices pushed up import costs and widened the current-account deficit. The government may lower its growth target for the next two years, President Lee Myung Bak said in an interview with the British Broadcasting Corp. Seoul on July 6.

Central banks intervene in currency markets by buying or selling foreign exchange. South Korea has bought about $7 billion of won since the end of May to support its currency, JoongAng Ilbo newspaper reported July 1.

`Temporary Reprieve'

Malaysia's ringgit was the third-biggest gaining currency among the 10 most-traded in Asia outside Japan after crude oil declined yesterday by the most in more than two weeks, easing concern that inflation will worsen.

``Lower oil prices will be a reprieve for Asian economies and currencies,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. The ringgit may strengthen to 3.25 in the weeks ahead, Yahya said.

Crude oil for August delivery traded at $142.05 a barrel in after-hours trading on the New York Mercantile Exchange. It fell as much as 4 percent yesterday.

Malaysia raised gasoline prices by 41 percent and diesel by 63 percent on June 5, a move that may push June's inflation to a nine-year high of 5 percent, Bank Negara Malaysia said last month. The government subsidizes fuel prices to make them affordable to consumers.

Rupiah Yields

Indonesia's rupiah rose 0.1 percent to 9,206 per dollar for a second day of gains on speculation the central bank will keep raising borrowing costs to quell inflation, boosting demand for the nation's higher-yielding assets.

Bank Indonesia on July 3 lifted its benchmark interest rate for the third straight month to 8.75 percent, increasing the rate advantage to 6.75 percentage points over the U.S. benchmark rate, the widest since 2006.

``Bank Indonesia has the intention to keep increasing the rate,'' said Lindawati Susanto, head of currency trading at Bank Resona Perdania PT in Jakarta. ``The rupiah will be interesting'' for investors.

Indonesia is looking for ways to lessen its fuel subsidy burden without having to raise pump prices, President Susilo Bambang Yudhoyono said yesterday.

Elsewhere, China's yuan rose for the first time in three days, gaining 0.2 percent to 6.8575 in Shanghai. It was the second-best performer in Asia behind the won.

The Philippine peso fell 0.2 percent to 45.795 per dollar while Singapore's dollar was little changed at S$1.3634. Thailand's baht fell for a third day to 33.69 against the U.S. currency and Taiwan's dollar was little changed at NT$30.39.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.