Asian Currencies Rise, Led by Taiwan Dollar, on Spending Plans

By David Yong

Feb. 3 (Bloomberg) -- Asian currencies rose, with Taiwan’s dollar posting its biggest gain this year, on optimism investor appetite for the region’s equities will increase as governments step up public spending.

Taiwan’s currency rebounded from a four-year low as the island’s government plans to add as much as NT$30 billion ($893 million) to its economic stimulus package, the Economic Daily News reported yesterday. Asian economies have room to adopt counter-cyclical measures by boosting domestic demand, the International Monetary Fund said.

“A strong rebound in stocks is giving an impetus back to the currency market,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul.

Taiwan’s dollar gained 0.3 percent to NT$33.65 as of 12:18 p.m. in Taipei, the most since Dec. 30, according to Taipei Forex Inc. South Korea’s won climbed 0.3 percent to 1,386 per dollar. The peso advanced 0.5 percent to 47.49 per U.S. dollar in Manila, according to Tullett Prebon Plc.

The MSCI Asia Pacific Index of regional equities jumped 1.5 percent, led by Taiwanese stocks. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, halted a three-day decline.

“In the middle of the year, you will get these shifts in the Taiwan dollar when there’s a shift in risk appetite,” said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. “The trend is still lower.”

Spending Power

Asian economies have room to adopt counter-cyclical measures by boosting domestic demand to spur growth, IMF Managing Director Dominique Strauss-Kahn told reporters from Washington. There are “grounds for optimism” in the region, he said.

The yen ended a three-day winning streak against the dollar and euro after the Bank of Japan said it will resume a program of buying corporate shares held by banks, helping revive demand for higher-yielding assets. The yen declined 0.4 percent to 89.85 per dollar, from 89.45 late in New York yesterday. The currency dropped 0.6 percent to 115.53 per euro.

The Korean currency, Asia’s worst performer last year, snapped a three-day decline after briefly falling beyond 1,400 per dollar for the first time since Dec. 10. The Kospi stock index jumped 2.4 percent after two days of losses. Currency reserves rose to $201.74 billion in January from $201.22 billion in the previous month, the Bank of Korea said in Seoul today.

Won Forecasts

South Korea’s won will be 16 percent stronger on average this year as the currency’s biggest loss in a decade revives exports and prompts intervention, according to Kia Motors Corp. and Korea Electric Power Corp.

Kia, the nation’s second-largest automaker, Kepco, the biggest power producer, and Korean Air Lines Co., the leading airline, are basing their financial projections on an average exchange rate of 1,200 per dollar, a gain of 16 percent from yesterday’s close of 1,390.

The IMF expects South Korea’s economy will contract 4 percent in 2009 and stage a recovery in 2010 with growth of 4.2 percent, according to a statement from the finance ministry today.

“The IMF expects the South Korean economy to hit the bottom in the second quarter and start to pick up in the third quarter,” Vice Finance Minister Hur Kyung Wook told reporters yesterday in comments embargoed until today. “We have sufficient room both on the fiscal and financial side to increase spending and cut rates if needed.”

Rating Outlook

Malaysia’s ringgit reached an eight-week low after Fitch Ratings cut the outlook on the nation’s local-currency debt rating to “negative” from “stable,” citing the government’s widening budget deficit.

“As long as the U.S. economy and stock market continue to suffer, it will affect currencies like the ringgit and Singapore dollar,” said Hideki Hayashi, chief economist at Shinko Securities Co. in Tokyo. “Investors will prefer to keep their assets liquid and this will sustain the demand for U.S. dollars, at least in the next six months.”

The ringgit fell to 3.6365 per U.S. dollar, the weakest since Dec. 9, before trading at 3.6225 in Kuala Lumpur versus 3.6077 on Jan. 30. Markets were closed yesterday for a public holiday.

Deputy Prime Minister Najib Razak on Jan. 29 said Malaysia will unveil a second fiscal stimulus program to help revive growth. The budget deficit will be revised up from its forecast of 4.8 percent of gross domestic product, he said.

Elsewhere, the Singapore dollar gained 0.2 percent to S$1.5116 and China’s yuan advanced 0.1 percent to 6.8443. The Thai baht was little changed at 34.96, while the Vietnamese dong held at 17,485.50.

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