Asian Currencies Rise, Led by Won, on Support From Authorities

By Anil Varma and Kim Kyoungwha

Sept. 4 (Bloomberg) -- Asian currencies gained, with South Korea's won rebounding from a four-year low, as policy makers allayed concerns that the region is facing capital flight.

The won, Asia's worst performer this year, climbed the most in two months after Finance Minister Kang Man Soo said there was ``no need to worry about a crisis'' similar to the 1997 financial meltdown. Kang said on KBS TV in Seoul late yesterday that the government ``hasn't lost credibility'' on policy. The currency also advanced after the government said it will sell $1 billion in foreign-currency bonds this month.

A 17 percent drop in the won this year sparked speculation South Korea may be headed for a repeat of 1997, when the nation turned to the International Monetary Fund for a $57 billion bailout to help companies repay debt. The economy is ``much stronger'' than a decade ago with profitable companies, well- capitalized banks and larger reserves, the IMF said yesterday.

Speculation of a crisis ``is exaggerated,'' said Edgar Chuan, managing director with Descartes Investment Management Ltd. in Hong Kong. ``When you look at the overall economic situation, it's definitely very different from what happened in 1997. The Korean government will have no problem.''

The currency rose 1.7 percent to 1,129 against the dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. Nine of the 10 most-active Asian currencies outside of Japan strengthened.


Technical Chart

India's rupee and the Malaysian ringgit advanced on speculation some investors judged their recent losses excessive as technical charts used to measure potential turning points in prices showed a reversal is due. The dollar's 14-day relative strength index against the two currencies rose past 70, indicating purchases of the dollar may have peaked.

The rupee rebounded from an 18-month low, snapping a five- day decline, to trade at 44.285 a dollar in Mumbai, according to data compiled by Bloomberg. The ringgit rose for the first time in six days, gaining 0.3 percent to 3.426. It yesterday touched 3.4430, its weakest level since September 2007.

Taiwan's dollar rose from a six-month low on speculation the central bank will sell some of its $291 billion foreign- exchange reserves to support the currency.

The island's currency gained for the first time in five days after the Commercial Times reported the Central Bank of the Republic of China (Taiwan) sold about $500 million yesterday. The Taiwan dollar in August had its biggest monthly drop in seven years as government reports showed exports slowed.

``Given the volatility in Asia the last few days, the CBC was also in the market,'' said Emmanuel Ng, an economist at Overseas-Chinese Banking Corp. in Singapore.

Taiwan's currency strengthened 0.2 percent to NT$31.761 per dollar, according to Taipei Forex Inc.

Stemming Volatility

Thailand's baht snapped a four-day loss on speculation the central bank was supporting the currency to help temper inflation and support economic growth.

Bank of Thailand Governor Tarisa Watanagase yesterday reiterated earlier comments saying the bank will ``act if necessary'' to stem volatility in the baht. The currency slumped 2.5 percent in the past month as anti-government protests escalated, prompting Prime Minister Samak Sundaravej to declare a state of emergency this week.

``Even with the Bank of Thailand holding the dollar-baht down, given the political environment, it will be premature to call for a reversal,'' said Vishnu Varathan, an economist at Forecast Singapore Pte.

The baht rose 0.1 percent to 34.44 against the dollar, Bloomberg data show. The currency may weaken to 35.50 over the next 12 months, Varathan said.

Elsewhere, the Singapore dollar advanced 0.8 percent to S$1.4287 against the U.S. currency and the Philippine peso climbed 0.4 percent to 46.53. Vietnam's dong rose 0.2 percent to 16,585.

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.