Asian Currencies Climb, Led by Won, on Stock Rally, Dollar Swap

By David Yong

Feb. 4 (Bloomberg) -- Asian currencies gained for a second day, led by the South Korean won, as a rally in global stocks and government support for financial markets bolstered demand for emerging-market assets.

Malaysia’s ringgit strengthened the most in a week as regional stocks rallied after the U.S. government said it will step up efforts to fight the recession. The won climbed after the central bank agreed a six-month extension for a $30 billion currency swap with the Federal Reserve, a facility that helped ease a shortage of dollars.

“Risk appetite has improved and if money flows out of the U.S., it will find a new home in Asian markets where currencies have depreciated a lot,” said Ang Kok Heng, chief investment officer at Phillip Capital Management in Kuala Lumpur with $150 million in assets. “There’s still concern about the economy and banks, but there’s optimism for improvement.”

The won climbed 1 percent to 1,375.50 per dollar as of 10:59 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The ringgit appreciated 0.3 percent to 3.6107 per dollar, according to data compiled by Bloomberg. The Taiwan dollar gained 0.2 percent to NT$33.66.

The MSCI Asia Pacific Index of regional shares rose 0.8 percent, tracking yesterday’s gains in the Standard & Poor’s 500 Stock Index. Investors demanded a lower yield premium to buy emerging-market debt, according to the JPMorgan & Chase’s EMBI+ Index.

Korean Won

The Korean currency has dropped 8.4 percent versus the greenback so far this year, after tumbling 26 percent in 2008, on concern sliding exports will starve the country of foreign exchange. Korea’s exports slumped by a record 33 percent in January. The swap deal with the Fed will now last a year and can be utilized through October.

“The extension is a positive signal to a market wary of a shortage of dollars,” said Park Sang Bae, a currency dealer with state-run Industrial Bank of Korea in Seoul. “Sustained foreign buying of shares is also a boost to the won.”

Global funds bought more Korean shares than they sold for a sixth day, the longest run of net purchases in a month, according to Korea Exchange. The Kospi index added 2.3 percent.

“Risk appetite is making a slight comeback as in the past couple of days, we had more announcements of fiscal stimulus plans by major governments and more interest-rate cuts,” said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. “This is helping sentiment on Asian currencies in the short term. But we are skeptical if it will have a lasting impact.”

Taiwan’s government will offer tax breaks, subsidized loans and rent reductions on land to lure local investors back from China, the economics ministry said yesterday.

Elsewhere, the Singapore dollar rose 0.6 percent to S$1.5067 against the U.S. currency and the Chinese yuan gained 0.1 percent to 6.8331.

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