Asian Currencies Climb as Stocks Rally; Won, Ringgit Lead Gains

By Anil Varma and Bob Chen

Dec. 18 (Bloomberg) -- Asian currencies advanced versus the dollar, led by South Korea’s won and Malaysia’s ringgit, as regional stock gains spurred demand for emerging-market assets.

Nine of Asia’s 10 most-active currencies excluding the yen strengthened and Hong Kong’s dollar was unchanged at the upper end of its fixed exchange rate as near-zero U.S. interest rates prompted investors to favor higher-yielding assets. The won, Asia’s worst performer this year, rose to a six-week high as overseas funds bought more Korean shares than they sold. The ringgit jumped the most since a dollar peg ended in July 2005.

“Asia seems to be attracting an uptick in equity flows,” said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. “There’s just alot of cheap money out there at the moment.”

The won gained 2.6 percent to 1,292 per dollar as of the 3 p.m. local time close, according to Seoul Money Brokerage Services Ltd. It touched 1,281, the strongest since Nov. 5. Malaysia’s currency rose 1.9 percent to 3.4625 per dollar. India’s rupee climbed as much as 1.5 percent to 46.97 per dollar, the highest in six weeks.

Asian stocks rose for a second day after the Federal Reserve said on Dec. 16 it will use “all available tools” to combat a recession in the world’s biggest economy. The central bank this week cut its federal funds rate to between zero and 0.25 percent, the lowest level among industrialized nations.

The MSCI Asia Pacific Index of regional shares is up 10 percent so far in December, headed for its biggest monthly gain since June 1999. The last time the benchmark posted a monthly increase was April.

‘Yen Intervention’

The yen fell from near a 13-year high against the dollar after Japanese Finance Minister Shoichi Nakagawa signaled the nation is ready to intervene in the foreign-exchange market for the first time in four years. The Japanese currency also slid toward a five-week low versus the euro after Nagakawa said “we will take necessary steps if needed” to limit the currency’s advance and protect the overseas earnings of Japanese exporters.

“We are at such low levels now that yen intervention becomes a possibility,” said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. in Tokyo.

Japan’s currency fell to 87.87 per dollar in Tokyo from 87.24 yen late yesterday in New York, when it rose to 87.14, the highest level since July 1995. Against the euro, it dropped to 127.04 from 125.80 yesterday. The yen may decline to 88 per dollar today, Matsumoto said.

Malaysia’s Ringgit

Malaysia’s ringgit rose for a fourth day. The currency appreciated as much as 2.2 percent to 3.4527 per dollar, the strongest level since Oct. 3, according to data compiled by Bloomberg.

The currency has weakened 4.5 percent this year, headed for its first annual loss since Bank Negara Malaysia abandoned a fixed-exchange rate of 3.8 to the dollar three years ago.

A global recession prompted investors to flee emerging markets this year, sending the Korean won down 28 percent and India’s rupee 16 percent. Thailand’s baht dropped 13 percent, the rupiah 15 percent and the Philippine peso 12 percent.

“There definitely has been some overshoot on the downside for Asian currencies,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “I don’t expect to see a rapid turnaround in Asian currencies. They may have bottomed though.”

‘Stronger’ Rupee

India’s rupee climbed for a fourth day as the benchmark share index, the Bombay Stock Exchange’s Sensitive Index, added 2.4 percent, headed for the biggest advance in more than a week. Average daily purchases of Indian shares this month by overseas investors exceeded sales for the first time since April, data from the nation’s capital markets regulator showed.

“The rupee is stronger, tracking the trend across Asian currency and equity markets,” said Vikas Babu, a trader at state-owned Andhra Bank in Mumbai. “The dollar carry trade is making a comeback now that the Fed has cut rates really low.”

The rupee traded at 47.01 in Mumbai, from 47.665 yesterday, according to data compiled by Bloomberg. It may rise to 46.5 in the coming weeks, Babu said.

The Taiwan dollar rose to a two-month high as overseas investors bought more of the island’s shares than they sold for a fourth straight day.

The currency is “relatively stable,” the central bank said after the close of trading in the island’s financial markets yesterday and today. The currency strengthened 1 percent yesterday, its biggest gain since Oct. 30, and 0.8 percent today.

Exporters to Gain

The Taiwan dollar and other “perceived-riskier currencies are doing quite well,” said State Street’s Evans. “The U.S. will do whatever’s necessary to kick-start the economy and the countries that stand to gain most are the exporters such as Taiwan.”

The local dollar rose as much as 0.9 percent to NT$32.440 versus the U.S. currency, the strongest since Oct. 16, before trading at NT$32.471, according to Taipei Forex Inc.

The Philippine peso advanced to the highest in more than two months before Bangko Sentral ng Pilipinas reduced its benchmark interest rate to 5.5 percent from 6 percent. The Federal Reserve’s reduction of borrowing costs earlier this week widened the rate differential with the Philippines to the most in four years.

‘Bias Toward Peso’

“We are seeing a bias toward the Philippine peso due to the interest-rate differential,” said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila. “The recent aggressive Fed cut is supporting the high- yield currencies.”

The peso strengthened as much as 0.7 percent to 46.55 per dollar, the highest since Sept. 29, before trading at 46.735 in Manila, according to Tullett Prebon Plc. The peso is headed for its first annual decline in four years and the biggest drop since 2000.

Elsewhere, Singapore’s dollar strengthened 1.4 percent to S$1.4377 against the U.S. currency. Thailand’s baht advanced 0.3 percent to 34.43. Vietnam’s dong traded at 16,986 versus 16,983 yesterday.

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net.