South Korean Won, Taiwan Dollar Advance After Fed Lowers Rate
By Lilian Karunungan
March 19 (Bloomberg) — South Koreas won and the Taiwan
dollar rose on speculation the Federal Reserves cut in the
benchmark interest rate will boost investor appetite for higher-
yielding assets in the region.
The won gained for a second day as Koreas Kospi index of
shares advanced 2.1 percent, the most since Feb. 14. Sentiment
improved as Goldman Sachs Group Inc. and Lehman Brothers Holdings
Inc. reported earnings that were better than economists expected.
The Fed lowered borrowing costs by three-quarters of a percentage
point to 2.25 percent yesterday to bolster the economy.
“Asian currencies will continue to keep pricing in widening
interest-rate spreads, said Suresh Kumar Ramanathan, a rates
and currency strategist at CIMB Investment Bank Bhd. in Kuala
Lumpur. “Against the backdrop of higher inflation, we dont see
any reason for central banks to cut rates just yet.
Koreas currency climbed 0.5 percent to 1,009.10 against the
dollar as of the 3 p.m. close in Seoul, compared with 1,014
yesterday, according to Seoul Money Brokerage Services Ltd. The
Taiwan dollar gained 0.1 percent to NT$30.72, according to Taipei
Forex Inc.
The won also advanced after Koreas Vice Finance Minister
Choi Joong Kyung said today that he doesnt expect any
“drastic movements in the currency and that the authorities
will take preemptive measures if necessary. The currency
yesterday snapped 12 days of losses on speculation the Bank of
Korea bought the won as it slumped to the lowest since 2005.
The currency has been overvalued over the years and the
wons loss in the past days may be part of a “normalization,
Choi said at the start of a meeting with his counterparts at the
central bank and the Financial Services Commission in Seoul.
Taiwans Improving Relations
Asian currencies also rose as the U.S. dollar fell against
the euro on speculation a housing slump will cause credit-market
losses at banks to widen.
Taiwans dollar rose for a second day before the island
elects a new president March 22, with both candidates supporting
closer ties with China, the islands biggest overseas market.
“Exporters are buying the Taiwan dollar as improving
relations with the mainland will probably spur investment and
lift the currency after the election, said Henry Lin, a
currency trader at Shin Kong Commercial Bank in Taipei.
The local dollar has gained 3.1 percent in the past month.
Regional Currencies
Thailands baht climbed to the highest level since August
1997 on speculation exporters were converting overseas earnings
to guard against further losses in the dollar after the U.S. rate
cut.
“Exporters are still eagerly selling dollars, said Tetsuo
Yoshikoshi, an analyst at Sumitomo Mitsui Banking Corp. in
Singapore. “Only the Thai central bank is an active buyer of the
dollar.
The baht was at 31.17 per dollar after earlier trading at
31.09, according to data compiled by Bloomberg.
Indonesias rupiah fell, reversing earlier gains, on
speculation state oil company PT Pertamina was buying dollars for
its imports.
The currency dropped following its biggest rise yesterday
since January. Pertamina needs $100 million a day to import fuel
if the price of oil is more than $110 a barrel, President
Director Ari Hernanto Soemarno said yesterday. Crude was at
$108.60 after reaching a record $111.80 this week.
“Pertamina is buying U.S. dollars, said Muhammad Fauzi
Halim, a currency trader at PT Bank Resona Perdania. “Though
theres a decline in the oil price traders think its not enough
to cover their positions.
The currency fell 0.3 percent to 9,215, according to data
compiled by Bloomberg.
Elsewhere, the Malaysian ringgit dropped 0.4 percent to
3.1780. The Philippine peso declined 0.4 percent to 41.670,
according to Tullett Prebon Plc. The Vietnamese dong was at
15,847.50.
To contact the reporters on this story:
Lilian Karunungan in Singapore at
lkarunungan@bloomberg.net
