Asia Currencies Gain, Led by Won, on Rate Cuts, U.S. Spending

Asian currencies gained, led by the South Korean won and the Indonesian rupiah, on speculation interest-rate cuts in the region and U.S. stimulus spending will help revive economic growth.

The won strengthened for a third day as global funds bought more of the nation’s shares than they sold for a sixth day, the longest stretch since April 2007, according to Korea Exchange data. The MSCI Asia Pacific Index of equities jumped to the highest in two months after President-elect Barack Obama said the U.S. will incur deficits for years to pull the economy out of recession.

“Sentiment for the won is heartened by foreign net buying of stocks,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “Any rapid gain in the currency may be limited as importers’ deals and offshore dollar buying are likely to emerge.”

The won climbed 1.8% to 1,289.10 per dollar as of 12:32 p.m. in Seoul and reached 1,284.35, according to Seoul Money Brokerage Services Ltd. The rupiah rose 1.7% to 10,850 per dollar, while the Malaysian ringgit advanced 0.3% to 3.4990. The Taiwan dollar gained 0.3% to NT$32.948 and the Philippine peso strengthened 0.9% to 46.528.

South Korea’s Kospi index of equities has advanced 8.5% this year following a 40% loss in 2008. The won, which declined 26% last year, the worst performer among the 10 most-traded regional currencies outside Japan, will weaken to 1,425 by the end of March, according to the median estimate in a Bloomberg survey of 23 strategists.

Obama Spending

The dollar rose for a sixth day against the yen after General Motors Corp. said it has enough government funding to cover the worst-case scenario and may not need additional loans to survive. The dollar rose to 93.84 yen at 12:38 p.m. in Tokyo from 93.65 yen late yesterday in New York. Against the euro, it was at $1.3511 from $1.3536.

“There’s high expectations about the impact of Obama’s economic policies, so people are taking a bit more risk,” said Lam Chee Mun, who helps manage about $200 million as an investor at TA Investment Management in Kuala Lumpur. “Economic data is still weak and you can’t be overly bullish on stocks or the ringgit.”

Indonesia’s central bank will probably reduce its benchmark interest rate for the second straight month. Policy makers may lower the borrowing cost by a quarter-percentage point to 9% today, according to 14 of 16 economists in a Bloomberg News survey.

“The expectations of a rate cut are probably going to help the local bond market, which in turn would encourage foreign investors to buy,” said Euben Paracuelles, an economist in Singapore at Royal Bank of Scotland Plc., 58 percent-owned by the U.K. government. “That’s got to be a support for the rupiah.”

Other Currencies

Indonesian rupiah offshore forward contracts show traders scaled back bets for how far the currency will weaken over the next three months. Non-deliverable contracts show the currency will trade at 11,310 to the dollar in three months, versus 11,320 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery.

The Philippine peso rose for a third day against the dollar as local stocks rose to a two-month high.

“Financial markets are hoping that U.S. spending will contain and avoid a deep global recession,” said Ricky Cebrero, treasurer at East West Banking Corp. in Manila. “Remittance flows are still healthy and corporate demand for dollars is still weak.”

Elsewhere, the Thai baht rose 0.2% to 34.99 per U.S. currency. The Singapore dollar jumped 0.5% to S$1.4731. Vietnam’s dong was at 17,465.50, from 17,476.00. (Bloomberg)