Asian Currencies Gain, Led by Won, Taiwan Dollar as Stocks Rise

By Kim Kyoungwha

March 10 (Bloomberg) -- Asian currencies strengthened, led by South Korea’s won and the Taiwan dollar, as stock gains helped draw funds to emerging markets.

The Korean currency strengthened for a third day, extending its rebound from an 11-year low, and Taiwan’s dollar rose as MSCI’s benchmark of regional stocks outside Japan climbed from a three-month low. U.S. shares slumped yesterday after Warren Buffett said the nation’s economy “has fallen off a cliff” and the World Bank predicted a global contraction.

“Emerging-market currencies in Asia and elsewhere are in for a brief rebound,” said Dariusz Kowalczyk, a currency strategist with SJS Markets Ltd. in Hong Kong. “Most of the negative news is out as yesterday brought a flood of pessimistic commentary from Buffett and the World Bank. So it’s time to buy riskier assets in a short-term opportunistic trade.”

The Korean won rose 1.7 percent to 1,523.55 per dollar as of 12:49 p.m. in Seoul. It touched 1,597 on March 6, the lowest since 1998. Taiwan’s dollar gained 0.5 percent to NT$34.64 and Singapore’s dollar strengthened 0.5 percent to S$1.5435.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, added 0.4 percent to 102.16. It last week touched 101.08, the lowest since November 2004. The MSCI Asia Pacific excluding Japan Index rose 1.4 percent, paring this year’s loss to 16 percent. Standard & Poor’s 500 Index futures were up 0.8 percent, after the U.S. share benchmark slid 1 percent yesterday.

‘Excessive Overshoot’

The yen fell for a third day versus the euro before government reports that analysts say will show Japan’s recession is deepening, reducing the appeal of the nation’s currency. The yen dropped to 125.38 versus the euro in Tokyo from 124.65 late in New York yesterday. The currency was at 98.91 per dollar from 98.84.

The won, whose 17 percent drop this year makes it Asia’s worst performer, strengthened as overseas investors bought more Korean shares than they sold for the first time in three days. The Kospi stock index climbed 0.9 percent.

“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”

‘Bottoming Out’

Taiwan’s dollar also rose in tandem with shares after a government report late yesterday showed the island’s exports dropped at a slower pace in February. Overseas sales dropped 29 percent from a year earlier, following a record 44 percent decline in January.

“You can take the last few months as indicating that the plunge is bottoming out,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “At least exports are no longer in free fall.”

Malaysia’s ringgit advanced on optimism a second public spending program to be announced in parliament today will prevent the economy from slipping into a recession.

The currency declined 2.3 percent over the past three months even after Deputy Prime Minister Najib Razak implemented a $1.9 billion stimulus package in November. The new spending may be as much as 35 billion ringgit ($9.4 billion), Agence France-Presse reported March 8, citing a government official it didn’t identify.

Stimulus Program

“The stimulus will help the economy and the key is not so much the amount but the implementation,” said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. “It may take time to remove the gloom in the economy and the ringgit.”

The ringgit gained 0.5 percent to 3.7015 per dollar in Kuala Lumpur and Indonesia’s rupiah strengthened 0.7 percent to 12,090 in Jakarta. Financial markets in both cities were shut yesterday for public holidays.

Elsewhere, the Thai baht rose 0.2 percent to 36.08 per dollar and the Philippine peso added 0.5 percent to 48.35.

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