Asian Currencies: Won, Peso Gain on U.S. Plans to Calm Markets

By Lilian Karunungan and Kim Kyoungwha

Sept. 19 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance today after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.

Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.

``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.

Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.

``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''

The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 next week, according to 10 strategists and traders surveyed by Bloomberg News.

Blow to Won

Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.

``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.

The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said today.

Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.

`Risk Aversion'

The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.

``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.

India's rupee climbed from more than a two-year low on speculation gains in Asian stocks will help stem capital outflows.

``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''

The local currency rose 0.4 percent to 46.31, according to data compiled by Bloomberg. The rupee, which dropped 1.3 percent this week, may strengthen to 46 in coming days, Chiney said.

Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 32 percent this year.

Indonesia Intervention

Indonesia's rupiah rose for a fourth day as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.

There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''

The rupiah traded at 9,370 in Jakarta, from 9,400 late yesterday, according to data compiled by Bloomberg. The currency rose 0.7 percent this week.

Elsewhere, the Singapore dollar fell 0.4 percent to S$1.4358 against the U.S. currency. Malaysia's ringgit rose 0.1 percent to 3.4636. Taiwan's dollar gained 0.2 percent to NTS32.158. The Thai baht traded at 34.15 compared with 34.14 yesterday. Vietnam's dong dropped 0.5 percent to 16,715.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net