Korean Won, Ringgit Lead Gains in Asia as Credit Concerns Ease

By David Yong and Kim Kyoungwha

Sept. 8 (Bloomberg) -- Asian currencies advanced, led by South Korea's won and Malaysia's ringgit, on speculation the government rescue of U.S. mortgage lenders will slow credit- market losses and boost demand for regional assets.

The won jumped by the most in two months after the U.S. seized Fannie Mae and Freddie Mac to prevent defaults from crippling the companies that make up almost half the U.S. home- loan market. The Bank of Korea said today its investment in the debt sold by the two lenders is safe. Eight of Asia's 10 most- traded currencies gained as stocks rallied.

``Dollar sales increased after the bailout news of Fannie and Freddie,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``With the talk of a crisis cooling off, banks are shedding their dollar holdings en masse,'' he said, referring to concern the Korean economy was headed for a repeat of 1997.


The won rose 2.7 percent to 1,088.35 against the dollar as of 12:25 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The ringgit jumped 1.4 percent to 3.4135 in Kuala Lumpur, the most since a dollar link was scrapped in July 2005, according to data compiled by Bloomberg.

The U.S. yesterday announced plans to put Fannie and Freddie under so-called conservatorship and agreed to provide secured short-term funding and buy up to $100 billion of a special class of stock in each company to maintain a positive net worth.

`No Problem'

The Bank of Korea last week quashed speculation of a repeat of the 1997 financial crisis, a concern that sent its currency to a four-year low. The central bank isn't facing any problem on its holding of senior debt in Fannie and Freddie, Ahn Byung Chan, director general of the Bank of Korea's international bureau, said in a phone interview in Seoul.

The cost to protect Asia Pacific corporate bonds from default fell by the most in about five months, according to credit-default swaps prices.

Malaysia's ringgit halted a two-week slide as the MSCI Asia- Pacific Index of regional shares rose the most since January.

``The U.S. news will likely make investors less averse to risk,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The magnitude of today's move is surprisingly large, so it's quite hard to predict any levels.''

Indonesia's rupiah headed for its biggest one-day gain in almost a year as central bank Deputy Governor Hartadi Sarwono said the U.S. plan may create optimism the U.S. housing-market crisis will be resolved.

``It's possible that risk appetite will be better in the short term,'' said Masahiro Gao, vice president of the treasury unit at PT Bank Mizuho in Jakarta. ``Southeast Asian currencies will be stronger today and the rupiah will be bought.''

The rupiah climbed 1 percent to 9,275 per dollar in Jakarta, according to data compiled by Bloomberg. That's the biggest gain since Sept. 19 last year. The currency may rise to 9,200 today, Gao said.

Elsewhere, the Philippines peso added 1 percent to 46.37 against the U.S. dollar, Singapore's dollar climbed 1.5 percent to S$1.4166 and Thailand's baht gained 0.5 percent to 34.4. Taiwan's dollar climbed 0.8 percent to NT$31.608.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.