Asian Currencies: Won, Rupiah Rally on Measures to Stem Crisis

By David Yong

Oct. 13 (Bloomberg) -- Asian currencies gained, led by a rally in South Korea's won and Indonesia's rupiah, as government initiatives to spur global lending curbed risk aversion, boosting demand for stocks and emerging-market assets.

The won jumped by the most in since March 1998 after Australia and Europe agreed to guarantee bank debt to ease a credit squeeze and halt a rout in global shares. All of the 10 most-active currencies in Asia rose, including the Indonesian rupiah and Indian rupee, as regional central bankers meeting with the International Monetary Fund in Washington also consider ways to tackle the crisis.

``The won's advance will continue should Asian stock markets sustain gains,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``There's some room for exporters to sell more dollars.''

The won surged 5.7 percent to 1,238 per dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd., paring this year's loss to 25 percent. The rupiah strengthened 1.3 percent to 9,825 against the U.S. currency, the biggest gain since September 2007, and India's rupee advanced 1 percent from a record low to 48.005.

European leaders at a summit in Paris yesterday agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat. Australian Prime Minister Kevin Rudd yesterday said the nation will guarantee all deposits for three years as well as ``term wholesale funding'' for banks.

The U.K. government today said it will invest 37 billion pounds ($64 billion) in three of its biggest lenders to avert a banking collapse. The Federal Reserve will ``consider every option'' to restore confidence, Dallas Fed President Richard W. Fisher said yesterday.

Calming Markets

``The crisis has brought together the top leaders and that will be helpful in calming the markets,'' said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., Malaysia's biggest ratings company. ``Government guarantees have become explicit and that will help soothe irrational fears'' in stock and currency markets, he said.

The MSCI Asia Pacific excluding Japan Index of regional stocks rose 7.5 percent, the most in three weeks, recouping some of its 20 percent plunge last week. Japan's financial markets are closed for a public holiday.

The won gained after President Lee Myung Bak said South Korea, Asia's fourth-largest economy, isn't facing a repeat of the Asian crisis of 1997. The won surged 5.4 percent on Oct. 10 as the government promised steps to stabilize the currency, the region's worst performer this year.

``Our foreign-exchange reserves are 27 times more than in 1997,'' Lee said on KBS1 radio in Seoul. ``It's the government's top priority to create and protect jobs.''

`Short-term Relief'

Asian central bankers may put some measures together to prevent a deepening slowdown, Diwa Guinigundo, deputy governor of the Philippine central bank, said in Washington.

The Philippine peso climbed 0.9 percent to 47.26 per dollar, its best day in three weeks, on optimism global funds will pump more money into emerging markets as the credit crisis eases. Singapore's dollar jumped 0.9 percent from a one-year low to S$1.4677.

Global investors demanded 6.02 percentage points more than U.S. Treasury yields to own emerging-market sovereign debt, according to JPMorgan Chase & Co's EMBI+ Index. The risk premium rose to 6.53 points on Oct. 10, the most since April 2003.

``There's some expectation that all these measures will help the market to some extent,'' said Thomas Harr, a Singapore- based currency strategist at Standard Chartered Plc. ``It may be a short-term relief.''

Market Reopens

Indonesia reopened the stock market after a three-day halt and raised bank deposit guarantees to 2 billion rupiah ($202,000) from 100 million rupiah per account to revive investor confidence in banks.

Foreign investors cut their holdings of rupiah-denominated bonds to 99.54 trillion rupiah on Oct. 10 from 105.5 trillion rupiah on Sept. 30, the finance ministry said on its Web site.

India's rupee rose from an all-time low of 49.26 on Oct. 10 as the government, the Reserve Bank of India and the Securities & Exchange Board of India work on measures to boost the amount of cash in the banking system, Finance Minister Palaniappan Chidambaram said. The central bank last week cut its cash reserve ratio twice to infuse cash into the system.

The efforts will lift confidence that ``normalcy will return sooner rather than later,'' said Parthasarathi Mukherjee, president of treasury at Mumbai-based Axis Bank Ltd. ``That should bring back overseas investors to Indian assets.''

Elsewhere, Malaysia's ringgit rose to 3.4948 from a 13- month low of 3.5128 per U.S. dollar and Thailand's baht gained 0.4 percent to 34.24. Taiwan's dollar climbed 0.2 percent to NT$32.388, while China's yuan added 0.1 percent to 6.8260.

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