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

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

The won and Malaysia’s ringgit strengthened by the most in a week after the U.S. government said it will step up efforts to fight the recession. The Federal Reserve extended its foreign- currency swap lines with global central banks by six months through October, including a $30 billion facility with the Bank of Korea. Indonesia’s rupiah advanced after policy makers cut the benchmark interest rate for a third straight month.

“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. We are skeptical if it will have a lasting impact.”

Korea’s currency climbed 1 percent to 1,375.85 per dollar as of 1:37 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The ringgit appreciated 0.3 percent to 3.6100 and the rupiah gained for a second day to trade at 11,708, according to data compiled by Bloomberg.

The MSCI Asia Pacific Index of regional shares rose 1.2 percent following yesterday’s 1.6 percent gain in the Standard & Poor’s 500 Stock Index. The yield premium that investors demand to hold emerging-market debt over U.S. Treasuries narrowed for a fourth day, according to JPMorgan Chase’s EMBI+ Index. Bond default risk fell in Asia, according to the Markit iTraxx Asia index of investment-grade borrowers outside Japan.

Currency Swaps

The Fed extended currency-swap programs with the central banks of Australia, Brazil, Canada, Denmark, the U.K., the euro region, South Korea, Mexico, New Zealand, Norway, Singapore, Sweden and Switzerland. The Bank of Japan will consider an extension when its policy makers next convene, the Fed said in a statement yesterday.

“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.”

Korea’s currency has dropped 8.5 percent versus the greenback so far this year, after tumbling 26 percent in 2008, on concern that sliding exports will tilt the economy into its first recession since the Asian financial crisis in 1997. Exports slumped by a record 33 percent in January.

Risk Appetite

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 of stocks added 2.1 percent.

The yen traded at 89.58 per dollar in Tokyo from 89.44 in New York yesterday. The euro fell 0.2 percent to $1.3018 before a report that may show retail sales in the nations that share the euro slid for a seventh month in December.

Taiwan’s dollar gained 0.1 percent to NT$33.675 after the economics ministry yesterday said it will offer tax breaks, subsidized loans and rent reductions on land to lure local investors back from China and create jobs.

“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.”

Yuan Flexibility

China’s yuan climbed 0.1 percent to 6.8331, approaching a three-week high, after the central bank pledged to stem big fluctuations in the exchange rate, fanning speculation it won’t weaken the currency to help exporters.

The People’s Bank of China will keep the yuan relatively stable at “a reasonable and balanced level,” the Financial News reported, citing Governor Zhou Xiaochuan. The central bank today strengthened the yuan’s reference rate by 0.07 percent to 6.8348, the biggest increase since Dec. 17.

Elsewhere, the Singapore dollar rose 0.5 percent to S$1.5078 against the U.S. currency and India’s rupee gained 0.3 percent to 48.6875. The Philippine peso strengthened 0.4 percent to 47.34 and the Thai baht climbed 0.1 percent to 34.93.