By David Yong
Nov. 3 (Bloomberg) -- Asian currencies strengthened, with South Korea's won leading gains after the government announced an extra 14 trillion won ($10.9 billion) of fiscal stimulus measures to spur growth in the region's fourth-largest economy.
The won extended the biggest weekly gain in a decade after Finance Minister Kang Man Soo said the plan will create 200,000 new jobs and help lift gross domestic product growth by 1 percentage point. Indonesia's rupiah and India's rupee also advanced as interest-rate reductions by central banks from India to China spurred a rally in regional stocks.
``Investors and traders are soothed by reassurances and determination from policy makers that they will stabilize the financial markets,'' said Ko Yun Jin, a currency dealer in Seoul with Kookmin Bank, the nation's biggest lender. ``Demand for the won firmed up'' on the stimulus package, he said.
The won rose 2.3 percent to 1,262 per dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd., paring a 7 percent loss last month. The rupiah jumped as much as 2.6 percent to 10,685 and India's rupee surged 1.5 percent to 48.735 after touching a record low last week.
South Korea will spend 3.4 trillion won to help smaller companies and farmers and 1.3 trillion won to boost the labor market and aid low-income earners, Kang said. The government will raise the ceiling for foreign-exchange funds used to stabilize the currency to 20.6 trillion won next year.
All 10 of the most-traded currencies in Asia excluding the yen gained as the MSCI Asia Pacific Index of stocks outside Japan climbed 4.9 percent in a fifth day of gains. Japan's markets are closed for a holiday.
The won earlier weakened as much as 2.3 percent after the government said exports grew 10 percent in October, the slowest pace in 13 months. Korea needs to boost domestic demand as exports weaken, President Lee Myung Bak said today.
India Cuts Rates
The yen declined 0.6 percent to 99.04 against the U.S. currency, from 98.46 late in New York on Oct. 31, as stock gains encouraged investors to buy more higher-yielding assets funded in the Japanese currency. The yen weakened against all of the 16 most-active currencies.
The rupee gained the most in more than three months after the Reserve Bank of India on Nov. 1 unexpectedly cut its repurchase rate by half a percentage point to 7.5 percent and freed up funds in banks by lowering the cash reserve ratio to 5.5 percent from 6.5 percent as cover for deposits.
``The rupee should increase the pace of its appreciation,'' said Sanjay Arya, a treasurer at state-owned Bank of Maharashtra. ``The measures are an appropriate response to the developing global situation and domestic growth considerations.''
The ABN Amro Bank NV's Purchasing Managers' Index fell to 52.2 last month from 57.3 in September, indicating India's manufacturing grew at the slowest since April 2005.
Political Risks
Malaysia's ringgit climbed 0.7 percent to 3.5205, halting a three-month slide to December 2006's low, as political risks ebbed after Deputy Prime Minister Najib Razak said he won enough nominations to win the presidency of United Malays National Organisation uncontested.
Prime Minister Abdullah Ahmad Badawi on Oct. 8 said he will step down in March, handing power to his deputy. The president of UMNO, the dominant party in the National Front ruling coalition, becomes the country's premier by tradition.
``The leadership transition is clearer now and that should instill confidence and reduce some political risk attached to investing here,'' said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation's biggest ratings company. ``Some form of certainty is always good for the market and he can now focus on thrusting forward his economic plans.''
Tempting Investors
The biggest rout in Asian currencies since the regional financial crisis of 1997 is tempting investors, drawn by the world's fastest economic growth and $4 trillion of reserves.
Franklin Templeton Investments, which manages about $500 billion, favors the ringgit and China's yuan. Sydbank A/S, Denmark's third-largest bank, is buying the South Korean won, Indonesian rupiah and Indian rupee. Goldman Sachs Group Inc. said last week that the won, Asia's worst-performer this year after falling 26 percent against the dollar, may gain 10 percent in the next six months.
Elsewhere, Singapore's dollar gained 1 percent against the U.S. currency to S$1.4690, the Thai baht added 0.3 percent to 34.95 and the Philippine peso rose 0.9 percent to 48.51. China's yuan was little changed at 6.8373, while Indonesia's rupiah traded 0.4 percent stronger at 10,935.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.
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