Asian Currencies Halt Gains Near 2008 Highs on Greece Concern

By Lilian Karunungan

April 27 (Bloomberg) -- Asian currencies halted gains near the highest levels in at least 19 months after German Chancellor Angela Merkel said a rescue package for Greece wasn’t guaranteed, reducing demand for emerging-market assets.

A technical gauge for the Bloomberg-JPMorgan Asia Dollar Index signaled the measure was poised to fall after rallying to a 20-month high yesterday. Regional stocks declined after Merkel said yesterday she won’t release funds for Greece without a “sustainable” plan to cut the shortfall. The Standard & Poor’s 500 Index dropped yesterday on concern about a proposed overhaul of the U.S. financial system.

“Currencies are in a consolidation phase as mostly these have factored in the Greece financial issue,” said Mirza Baig, a foreign-exchange analyst at Deutsche Bank AG in Singapore. “The overnight weakness in equities, including the U.S. markets,” affected Asian currencies, he said.

The won weakened 0.6 percent to 1,110.90 per dollar as of 2:12 p.m. in Seoul, according to data compiled by Bloomberg. The currency yesterday touched 1,102.85, its strongest level since Sept. 12, 2008. The Philippine peso dropped 0.2 percent to 44.275 and the Malaysian ringgit fell 0.1 percent to 3.1835.

The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, was little changed after yesterday reaching 113.29, the highest level since August 2008. Its 14-day relative-strength index touched 69 yesterday, just shy of the 70 level that signals the gauge may reverse direction. The MSCI Asia-Pacific index of regional shares dropped 0.3 percent today.

Korea’s currency extended losses after the government said recent gains in the currency were “excessive.” We will take measures to counter herd behavior in the foreign-exchange market, Kim Ik Joo, director-general at the Ministry of Strategy and Finance, said by phone today.

Korea GDP

Asian currencies have rallied this year, led by Malaysia’s ringgit and the won, as the region’s economic recovery attracts global investors to local assets. Prospects China will revalue the yuan are also bolstering demand.

The ringgit reached 3.1710 per dollar yesterday, the highest level since May 2008, and the peso touched 44.158, the strongest since August of that year.

South Korea’s gross domestic product growth exceeded analysts’ estimates in the first quarter. GDP increased 1.8 percent from the final three months of last year, when it rose 0.2 percent, and beating the median forecast for a 1.5 percent rise in a Bloomberg News survey.

“Strong gross domestic product data was good but the market will be dominated by sentiment factors,” said Thomas Harr, senior currency-strategist at Standard Chartered Plc in Singapore.

Europe Woes

Germany’s reluctance to guarantee aid for Greece has led to concern a rescue package headed by the International Monetary Fund may stall. Yields on Greece and Portugal’s bonds have surged on concern the country’s credit woes will spread to other nations in the European Union.

“Investors are nervous about the contagion risk from the Greek situation, whether the other euro countries like Portugal will also be similarly affected,” said Penn Nee Chow, an economist at United Overseas Bank Ltd. in Singapore. “They are just waiting to see how things will play out. Asian currencies are still looking strong because of the very positive economic indicators in Asia.”

Taiwan’s dollar rose to a 20-month high as overseas investors increased holdings of the island’s stocks to take advantage of a planned trade accord with China.

Funds based abroad bought NT$26.8 billion ($857 million) more local shares than they sold yesterday, the biggest net purchases since Sept. 10. Taiwan President Ma Ying-jeou said April 25 that the next round of talks with China will likely be held before the end of the month or early in May.

China-Taiwan

A trade agreement with China “will help Taiwan’s exports and the economy,” said Tarsicio Tong, a foreign-exchange trader at Union Bank of Taiwan in Taipei. Capital inflows “will test the defenses of the central bank” to prevent the currency from rising beyond NT$31, he said.

The currency strengthened 0.2 percent to NT$31.290 against its U.S. counterpart, according to Taipei Forex Inc. It reached NT$31.269, the highest level since August 2008, the same month the island’s dollar last broke NT$31.

The Philippine peso declined on concern investors will trim holdings of the nation’s assets in the run-up to next month’s general election.

Presidential frontrunner Benigno Aquino yesterday said only fraud can stop him winning at the polls and such an event would trigger unrest comparable with the protests that swept his mother to power 24 years ago.

Philippine Election

Benigno Aquino, the 50-year-old son of former president Corazon Aquino, has led opinion surveys since entering the race last year and criticized how a switch to electronic voting machines is being implemented.

“Everyone is staying liquid as the election nears,” said Yvette Marquez, who helps manage 470 billion pesos ($10.6 billion) at BPI Asset Management in Manila. “It’s always better to be safe and hold off from investing until people are convinced elections are credible.”

Elsewhere in the region, the Singapore dollar and Indonesian rupiah were little changed versus the U.S. currency at S$1.3680 and 9,006, respectively. The Thai baht was unchanged at 32.24 and China’s yuan traded at 6.8266.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.