Asian Currencies Climb in Week, Led by Won, Rupiah, on Stocks

By Kim Kyoungwha

Dec. 13 (Bloomberg) -- Asian currencies climbed this week, led by the South Korean won and the Indonesian rupiah, on optimism that interest-rate cuts and economic stimulus plans will revive demand for emerging-market assets.

All of the 10 most-active regional currencies strengthened this week as the Dollar Index slumped the most in at least a decade. The Malaysian ringgit touched a one-month high and the Philippine peso reached the strongest since October 15. South Korea, Japan and China said they enhanced their currency swap arrangements to ensure stability in the foreign-exchange market.

“The propensity in recent weeks is for money managers to focus their flows on opportunities in undervalued currencies,” said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. “The extreme risk aversion we’ve had in the past months is gone and I assume that’s on the back of monetary and fiscal policies globally.”

The currencies trimmed the week’s gains after regional stocks fell yesterday on concern General Motors Corp. and Chrysler LLC won’t have enough cash to survive after the U.S. Senate rejected a $14 billion bailout plan for automakers.

The won rose as much as 10 percent this week, the most since October, before paring gains to 7.5 percent to 1,372.50 per dollar yesterday, according to Seoul Money Brokerage Services Ltd.

South Korea and Japan will increase an existing won-yen arrangement to $20 billion from $3 billion, according to statements by the central banks of both countries yesterday. China and South Korea will sign an accord worth 38 trillion won ($28 billion), the People’s Bank of China said.

‘Panic Subduing’

The arrangement will help boost the supply of dollars and make it easier for banks and companies to get funding. South Korea’s economy will grow 2 percent next year, the slowest in 11 years, from an estimated 3.7 percent this year, the Bank of Korea said yesterday.

“The gloomy economic prospect has partly been priced in,” said Roh Sang Chil, a currency dealer with Kookmin Bank, South Korea’s biggest lender in Seoul. “The extreme fear and panic that there will be no floor in the won is subsiding.”

Indonesia’s rupiah had its best week since 2001 as the government told companies and individuals to seek approval for currency purchases topping $100,000 a month.

Slowing Demand

“The new foreign-currency ruling will slow down the demand for dollars,” said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore. “There’s still the possibility for the rupiah to weaken once people start to take stock on how bad the global economy has become.”

The rupiah, which fell 0.5 percent yesterday, strengthened 5.9 percent this week to 11,050 versus the dollar, according to data compiled by Bloomberg.

The yuan headed for the biggest weekly advance since August on signs China is allowing currency appreciation to prevent global funds from leaving the country as growth in the world’s fourth-largest economy cools.

The currency rose for an eighth day, extending this year’s gain to 6.7 percent, the best among the 10 most-traded Asian currencies outside Japan. Assistant Finance Minister Zhu Guangyao last week vowed to keep the currency at a “reasonable and balanced” level.

The yuan strengthened 0.56 percent this week to 6.8427 a dollar in Shanghai from 6.8812 at the end of last week, according to the China Foreign Exchange Trade System.

Rate Cut

Thailand’s baht capped its best week in more than a year as the biggest cut in interest rates on record spurred optimism the economy will weather the global slump. The currency ended a four-week slide as the opposition Democrat party, favored by anti-government protesters, said it wooed some members of the now dissolved People Power Party to support its British-born leader for premier.

The baht gained 1.9 percent this week to 34.99 a dollar, Bloomberg data show. Malaysia’s ringgit headed for its biggest weekly gain since the end of a dollar peg in 2005, rising 1.5 percent this week to 3.5825.

Elsewhere, the Taiwan dollar advanced 0.7 percent this week to NT$33.315 against the U.S. currency. The Philippine peso climbed 2 percent to 48.105. The Indian rupee gained 2.1 percent to 48.56 and the Vietnamese dong was little changed at 16,982.50.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.