Currencies reverse losses as stocks rebound

Asian currencies gained on speculation the region's economies are resilient enough to weather the crisis in credit markets. Most Asian stock markets rebounded from earlier losses, supporting the Malaysian ringgit, Singapore dollar and India's rupee. Global funds bought more Philippine shares than they sold for the third time this week, pushing the peso up 0.2 per cent.

"The growth potential of the region is still there and that will encourage foreign funds to come in,'' said Gundy Cahyadi, an economist at Ideaglobal in Singapore. ``I think there will still be a possibility of Asian currencies strengthening'' by year-end. The ringgit gained 0.1 percent to 3.5043 per dollar as of 5:30 p.m. in Kuala Lumpur, after weakening to 3.5135. The peso added 0.2 percent to 46.585, according to Tullett Prebon Plc, the world's second-largest inter-dealer broker. Singapore's dollar climbed 0.1 percent to S$1.5259.

Asian stocks rose, reversing earlier losses, on speculation regional demand will help manufacturers weather a slowdown in the U.S., the world's biggest economy. The Morgan Stanley Capital International Asia-Pacific Index, a benchmark for the region, added 0.3 percent after dropping as much as 1.4 percent.

The Malaysian ringgit gained for the second consecutive day before Prime Minister Abdullah Ahmad Badawi delivers his budget speech tomorrow and the finance ministry releases its economic forecast for 2008. The ringgit has weakened for the past three months as exports slowed on waning demand from the U.S., the nation's biggest overseas market.

Malaysia Diversified

Malaysia's central bank yesterday said the effect on the economy from any U.S. slowdown will be less severe than in previous cases because the Asian nation has become less reliant on exports to North America. "We are a more diversified economy, and more importantly, we have a stronger domestic economy,'' Bank Negara Malaysia Governor Zeti Akhtar Aziz said yesterday in Kuala Lumpur.

India's rupee climbed 0.4 percent as the nation's benchmark share index gained for the third time this week. Overseas investors bought Indian equities worth $286.6 million more than they sold during the first two days of this week, compared with $343.6 million during the whole of last week, according to data from the Securities & Exchange Board of India.

``The rupee is stronger because of capital inflows, mostly stock-related,'' said Kishore, deputy manager of Andhra Bank Ltd. in Mumbai, who uses only one name. ``The stock market is doing well, and that should attract more flows.''

The yuan advanced after the central bank set the reference rate for trading at the highest since the end of a fixed exchange rate in 2005, signaling its intent to allow gains to help narrow a record trade surplus.

``The direction is for yuan appreciation against the dollar in the coming quarters,'' said Sebastien Barbe, a Hong Kong-based senior economist at Calyon, the investment banking unit of France's Credit Agricole SA. ``China will use foreign exchange as part of its measures'' to prevent overheating in the economy.

The yuan rose 0.2 percent to 7.5384 to the dollar in Shanghai, bringing gains to 9.8 percent since the end of a link to the U.S. currency in July 2005. The currency may climb to 7.25 by the end of this year, Barbe said.

Elsewhere, the Vietnamese dong dropped 0.02 percent to 16,243 against U.S. currency and the Indonesian rupiah was little changed at 9,400.