Asian Currencies: Korean Won, Peso Lead Gains as Stocks Rally

By David Yong

Nov. 5 (Bloomberg) -- Asian currencies gained, led by South Korea's won, as a surge in global stocks helped revive demand for riskier investments, including emerging-market assets.

The won jumped 13 percent in the past week as policy makers signed a $30 billion swap deal with the U.S. and unveiled a stimulus plan to quash concerns that the region's fourth-largest economy may be headed for a repeat of the 1997 financial crisis. The Philippine peso and Malaysian ringgit advanced as Asian shares jumped for a third day, tracking a rally in U.S. equities on presidential election day.

``Sentiment is getting a boost from rising stocks,'' said Kim Yule, a currency dealer with BNP Paribas in Seoul. ``Demand and supply of dollars is key to movements and the market is watching how importers and foreign investors are behaving.''

Korea's won strengthened 2.2 percent to 1,260 against the dollar as of 12:09 p.m. local time, according to Seoul Money Brokerage Services Ltd. The peso climbed 0.7 percent to 48.085 and the ringgit gained 0.2 percent to 3.5220.

The Kospi stock index climbed 5.6 percent, helping drive a third day of gains in the MSCI Asia Pacific Index. Global investors bought more Korean shares than they sold today, ending two days of net sales, according to data published by Korea Exchange.

Investors yesterday demanded 5.64 percentage points more than U.S. Treasury yields to buy emerging-market sovereign debt, according to JPMorgan Chase & Co's EMBI+ Index. The risk premium fell for a seventh day to the lowest since Oct. 14.

U.S. Election

The euro fell against the dollar after European Central Bank member Juergen Stark said policy makers are ready to use interest-rate policy to bolster the region's shrinking economy.

The euro fell to $1.2939 from $1.2981 late yesterday in New York. It weakened to 129.07 yen from 129.47 yen. The dollar bought 99.78 yen from 99.70 yen.

All but one of the 10 most-traded currencies in Asia outside Japan gained after U.S. stocks posted their biggest election-day rally since 1984. Democratic presidential candidate Barack Obama led Republican rival John McCain 200 to 124 electoral votes, according to projected results compiled by Bloomberg News. To win, 270 votes are required.

The peso climbed for a third day as slower inflation encouraged manufacturers to maintain lower stockpiles, curbing demand for dollars to buy imported raw materials.

Consumer prices rose 11.2 percent from a year earlier in October, the smallest increase in five months, the government reported today.

``Manufacturers have less reason to build up their inventory because inflation is tapering off and so we're seeing easing demand for dollars,'' next year, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila. ``Remittances are also coming in and those who held off converting before may be starting to exchange their dollars.''

Stimulus Plan

The ringgit advanced after the government late yesterday announced a 7 billion ringgit ($2 billion) program to boost spending on public projects and put more money into consumer pockets by cutting workers' pension contributions.

``The government realized it can't do much about the export sector, so the market will view with optimism the measures to spur private consumption,'' said Nikhilesh Bhattacharyya, a Sydney-based economist at Moody's Economy.com.

Elsewhere, the Singapore dollar gained 0.4 percent to S$1.4723, Thailand's baht rose 0.1 percent to 34.89 against the U.S. currency and China's yuan was little changed at 6.8337. Taiwan's dollar climbed 0.4 percent to NT$32.725 and Indonesia's rupiah advanced 0.1 percent to 10,885.

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