Asian Currencies: Won Paces Gain, Thai Baht Falls on Politics

By David Yong and Judy Chen

July 9 (Bloomberg) -- South Korea's won rose the most since March, leading gains in Asia, on speculation the authorities bought the currency to slow inflation at a decade high.

The won climbed to the strongest level in more than two months after the government reversed its stance for a weaker won as inflation quickened to 5.5 percent in June. Thailand's baht slumped to a six-month low on political turmoil.

``The government spent about $1 billion to $2 billion yesterday to support the won,'' said Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second- biggest financial group. ``The intervening power came from the coordination between the finance ministry and the central bank. They may come out one or two more times this week.''

Korea's currency climbed 2 percent to 1,012.75 against the dollar as of 1:22 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency reached 996.50, the strongest level since April 28.

The baht fell 0.2 percent to 33.74 per dollar, taking its loss to 1.3 percent in the past four days.

South Korea will allow state-run companies to borrow money from overseas ``and let them exchange the dollar into won from the local market,'' Choi Jong Ku, director general of the finance ministry's international finance bureau, said in a phone interview today.

The Ministry of Finance and Bank of Korea said on July 7 they will take steps to support the currency, which has fallen 8 percent against the dollar in the past year, making it the worst performer among the 10 most-traded in Asia excluding the yen.

Central banks intervene in currency markets by buying or selling foreign exchange.

Thai Politics

The baht declined on speculation a court verdict against a government official may delay Prime Minister Samak Sundaravej's plans to boost spending and economic growth, prompting overseas investors to sell assets.

The Supreme Court yesterday convicted Yongyuth Tiyapairath, a senior member of the ruling People Power Party, of buying votes in the Dec. 23 elections. The verdict may force Samak to disband the party under constitutional rules.

``Foreign investors are selling stocks,'' damping demand for the baht, said Apichart Suratanasurang, a foreign-exchange trader at BankThai Pcl in Bangkok. ``Political instability and the splits in the government are the main risk. People are worried if this develops into violence. The central bank has been protecting the baht, not wanting it to weaken too much.''

The benchmark SET Index of stocks has dropped 15.8 percent this year. Overseas investors sold 3.2 billion baht ($42 million) more Thai shares than they bought yesterday, according to stock exchange data.

Ringgit, Peso Advance

Malaysia's ringgit climbed by the most in three weeks while the Philippine peso gained the most since early June on optimism a decline in crude oil prices will ease inflation, boosting the appetite for local-currency assets.

Crude oil fell by 3.8 percent yesterday to $136.04 a barrel, the biggest drop since March, extending the slide from a record $145.85 reached July 3. Traders raised bets the ringgit's appreciation will quicken in 12 months, according to non- deliverable forward contracts.

`Big Support'

``Lower oil prices are a big support for the ringgit and there's some confidence coming back in the forward market,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The market is also seeing some official support'' from central bank buying, he said.

The ringgit climbed for a fifth day, rising to 3.2505 per dollar in Kuala Lumpur versus 3.2615 late yesterday, according to data compiled by Bloomberg. The peso strengthened 0.4 percent to 45.715 in Manila, according to Tullett Prebon Plc. It was headed for its biggest one-day gain since June 2.

The Philippines imports almost all its local fuel requirements, which rose 58 percent in the first four months of the year and stoked inflation to a 14-year high of 11.4 percent last month, government data show.

``The drop in oil eases some of the concern on inflation, a slowing economy and improves the value of peso assets,'' said Rafael Algarra, a treasurer at Security Bank Corp. in Manila. ``In terms of demand, lower oil costs means less dollars needed to buy it.''

Elsewhere, China's yuan fell 0.1 percent to 6.8584 in Shanghai and the Indonesian rupiah gained 0.2 percent to 9,192 against the dollar. Singapore's dollar was little changed at S$1.3630 while Taiwan's dollar held at NT$30.40.

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