Asian Currencies: Rupiah, Baht Lead Gains; Won Halts Decline

By David Yong and Lilian Karunungan

Oct. 9 (Bloomberg) -- Indonesia's rupiah led gains in Asian currencies after a series of interest-rate cuts by global central banks helped bolster investor confidence frayed by the global credit-market crisis.

The currency advanced from near the lowest in two years on speculation Bank Indonesia will intervene to prevent further losses after the government shut the stock exchange for a second day. Thailand's baht halted a six-day slump and the Philippine peso rose from a 17-month low. Taiwan, Hong Kong and South Korea lowered borrowing costs today, following yesterday's coordinated cuts by the U.S. and European central banks.

``There is new hope after central banks decided to unify to cut interest rates,'' said Muhammad Fauzi Halim, a currency trader at PT Bank Resona Perdania in Jakarta. ``Bank Indonesia is still guarding the rupiah.''

The rupiah gained 0.7 percent to 9,595 per dollar as of 12:02 p.m. in Jakarta, according to data compiled by Bloomberg. It touched 9,795, the weakest since January 2006. The baht rose 0.3 percent to 34.42 and the peso climbed 0.4 percent to 47.495.

Bank Indonesia was in the market to support its currency, Deputy Governor Budi Mulya said yesterday. Indonesia's foreign- exchange reserves dropped $3.8 billion to $56.8 billion in the seven weeks through Sept. 12. The local currency, which fell 3.3 percent in that time, has since lost a further 2.1 percent.

Stocks Recover

Asian stocks gained after four of the region's central banks cut rates, joining a global effort to limit the economic impact of the worst financial crisis since the Great Depression. The MSCI Asia Pacific Index of regional shares jumped 1.6 percent.

The baht gained on optimism lower borrowing costs will prompt investors to return to the region's stock markets amid a lull in street protests against the government in Bangkok.

``The coordinated rate cuts are boosting sentiment and also we're seeing relative calm on the political front, which is helping this temporary, short-lived rebound of the baht,'' said Radhika Rao, an economist at Ideaglobal Ltd. in Singapore.

The peso gained after the central bank Governor Amando Tetangco said yesterday coordinated interest-rate cuts by the world's major central banks gave him and fellow policy makers ``greater monetary policy space'' to face the global crisis.

Korea Crisis

South Korea's won swung between gains and losses after the Bank of Korea lowered the seven-day repurchase rate for the first time in four years to 5 percent from 5.25 percent. The Kospi Index of equities jumped 1.7 percent, the most in three weeks.

A global liquidity squeeze threatens to negatively affect the credit quality of Korean banks, mainly due to their ongoing foreign currency funding needs, Standard & Poor's Ratings Services said in a statement today.

Korean banks' foreign currency funding had more than doubled to $127 billion as of the end of June 2008 from the end of 2005, and a shortage of dollars may choke lending to local businesses, S&P analysts including Hong Kong-based JaeMin Kwon said.

The won traded at 1,383 versus the dollar versus 1,395 yesterday, according to Seoul Money Brokerage Services Ltd. It earlier slumped as much as 6.1 percent to 1,485.55, the weakest level since April 1998.

``Few in the market believe that the overnight global action will put an end to this worst crisis,'' said Oh Suk Tae, an economist at Citigroup Inc. in Seoul. ``This is no more than a temporary band-aid.''

Elsewhere, Malaysia's ringgit dropped 0.2 percent to 3.5052, the Singapore dollar weakened to S$1.4698 against the U.S. currency and Taiwan's dollar declined to NT$32.433 from NT$32.448 yesterday. China's yuan fell 0.1 percent to 6.8231.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.