Asian Currencies: Won Gains on Intervention, Peso Unchanged

By Aaron Pan and Kim Kyoungwha

Aug. 28 (Bloomberg) -- South Korea's won strengthened, leading gains amongst Asian currencies, on speculation the central bank will intervene to curb losses. The Philippine peso was little changed before a monthly interest-rate decision.

Korea's won rose for a second day after Vice Finance Minister Kim Dong Soo said the central bank will take action to prevent drastic moves in the currency when necessary. Seven of the 10 most-active Asian currencies outside of Japan rose today, with the rest little changed.

``Market participants are unwilling to push the dollar higher given that ministry officials' rhetoric raised the possibility of intervention,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``Offshore players are selling the dollar, which is also adding to the won's advance.''

The currency rose 0.2 percent to 1,081.95 against the dollar as of 1:01 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has fallen 13.6 percent this year, the worst performer in the region.

Central banks intervene in the currency market by selling or buying foreign exchange. The Korean currency will trade between 1,075 and 1,087 today, Won forecast.

Fund managers outside the nation sold more Korean shares than they bought for an eighth day, stock exchange data showed.

The Philippine peso was little changed against the dollar on speculation the central bank today will raise its key interest rate for the third time this year.

`Tightening Mode'

Bangko Sentral ng Pilipinas is ``still on a tightening mode'' as inflation probably held near the fastest pace in more than 16 years this month, Deputy Governor Diwa Guinigundo said yesterday. All 15 economists in a Bloomberg News survey forecast the central bank will raise rates by at least 25 basis points, or a quarter-percentage point, to 6 percent.

The peso ``will be range trading because we're awaiting the decision of the BSP,'' said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking Corp. in Manila. ``If the central bank increases its rate by 50 basis points, then it will help the peso.''

The local currency traded at 45.760 per dollar, compared with 45.725 late yesterday, according to Tullett Prebon Plc. The peso may trade between 45.60 and 46 today, Ayes said.

Malaysia's ringgit traded near a nine-month low on speculation the central bank will tolerate a weaker currency to help revive exports amid signs economic growth is slowing.

Malaysian GDP

The currency was little changed as economists in a Bloomberg News survey predicted gross domestic product expanded at the slowest in a year in the second quarter. Bank Negara Malaysia release the report tomorrow, the same day Prime Minister Abdullah Ahmad Badawi present the 2009 Budget in parliament.

``Growth could have slowed given that the external sector has cooled and domestic demand was affected after the March general elections,'' said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. ``It's not looking good for the ringgit and the central bank may want a weaker currency to help boost exports.''

The ringgit traded at 3.3765 per dollar, versus 3.3790 yesterday, according to data compiled by Bloomberg.

Taiwan's dollar was little changed near a six-month low, stabilizing on speculation a recession will be averted in the U.S., the world's biggest economy.

A U.S. government report yesterday showed durable goods orders unexpectedly increased in July. A stronger U.S. economy may help sustain Taiwan's exports, which account for about half of the island's gross domestic product.

`Facing Problems'

``These numbers suggest the U.S. economy may not be as bad, but I wouldn't be too quick to say all is well,'' said Thio Chin Loo, a currency strategist at BNP Paribas SA in Singapore. ``Taiwan's trade balance shifted to a deficit in July and it's still facing problems with the economy. We wouldn't be surprised to see the Taiwan dollar hit NT$32 by the end of the year.''

The island's currency was little changed at NT$31.470 against the U.S. dollar, compared with yesterday's close of NT$31.481, according to Taipei Forex Inc. It touched NT$31.571 on Aug. 25, the weakest level since Feb. 21.

Elsewhere, the Singapore dollar added 0.2 percent to S$1.4139, Indonesia's rupiah gained 0.1 percent to 9,156 and Thailand's baht rose 0.1 percent to 34.05. Vietnam's dong advanced 0.4 percent to 16,560.

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