Asian Currencies Advance on U.S. Banks Rescue, Led by Ringgit

By Aaron Pan and David Yong

Sept. 22 (Bloomberg) -- Asian currencies advanced, led by Malaysia's ringgit, on speculation a proposed $700 billion government bailout of U.S. financial companies will ease a credit crisis and bolster demand for emerging-market assets.

The ringgit rose to the strongest in two weeks against the dollar and regional stocks gained as the Bush administration sought Congressional approval to buy troubled assets from banks to avert a credit freeze. Nine of the 10 most-active currencies in Asia outside of Japan climbed, including Thailand's baht and the Philippine peso, as concern the rescue plan will widen the U.S. budget deficit weighed on the dollar.

There is ``a shift of funds into Asian stock markets and Asian currencies,'' said Hideki Hayashi, chief economist in Tokyo at Shinko Securities Co. ``Asian currencies can sustain their gains at least for this week.''

The ringgit rose 1 percent to 3.4170 per dollar as of 12:14 p.m. in Kuala Lumpur, according to data compiled by Bloomberg.

The Kuala Lumpur Composite Index of stocks surged as much as 1.5 percent even as the government considers fixing the ringgit to the dollar to shield the local economy from global turmoil. Malaysia's finance ministry will discuss today whether to re-peg the currency, a decision it made in September 1998 during the Asian crisis, the New Straits Times reported, citing Second Finance Minister Nor Mohamed Yakcop.

Increased Risk Appetite

Thailand's baht reached a one-month high of 33.88 per dollar, before trading 0.7 percent higher at 33.92. The currency extended last week's advance on optimism political turmoil in Southeast Asia's second-biggest economy will end after the appointment of a new prime minister last week.


``There's definitely some rebound in risk appetite this morning following the news, with Asian equity markets rising across the board,'' said Callum Henderson, head of foreign- exchange strategy at Standard Chartered Plc in Singapore.

Improved Thai political stability and expectations that the dollar will weaken as the U.S. budget deficit widens are also bolstering the baht, said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong.

Somchai Wongsawat replaced Samak Sundaravej as the new premier after the latter stepped down amid anti-government protests.

Indonesia's rupiah advanced, set for the biggest gain in six months, after the Jakarta Composite Index climbed for a fifth day, the longest winning streak since May.

`Broad Trend'

The rupiah ``is following the broad trend in the region,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. Regional currencies are advancing ``because of the U.S. bailout plan and equities rallying,'' he said.

The rupiah strengthened 0.8 percent to 9,302 per dollar from 9,375 on Sept. 19, according to data compiled by Bloomberg. That would be the biggest gain since March 18.

The Philippine peso rose to its highest in more than two weeks.

``The peso will appreciate because of easing pressure on the credit concerns,'' said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.

The local currency reached 46.08 per dollar, the strongest since Sept. 5, before trading 0.6 percent higher at 46.28, according to Tullett Prebon Plc.

Elsewhere, Taiwan's dollar rose 0.3 percent to NT$32.068 and Singapore's dollar added 1.1 percent to S$1.4201. South Korea's won slid 0.2 percent to 1,141.50 per dollar and Vietnam's dong declined 0.1 percent to 16,735.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.