Slowdown fears push yen up

ASIAN CURRENCIES ROUND-UP

The Japanese yen traded near the strongest level in more than a month against the dollar as concern that the global economy will slow prompted investors to cut bets on assets funded by loans in the currency.

The yen climbed against 12 of the 16 most actively traded currencies before reports that may show US unemployment increased, bolstering speculation the world's biggest economy is losing momentum. Reports yesterday showed growth in Europe's manufacturing industry slowed in December and Singapore's economy unexpectedly shrank last quarter.

The yen traded at 109.60 against the dollar as of 12:05 pm in Singapore from 109.66 late in New York yesterday. It matched a one-month high of 109.22. The currency also rose to 160.79 a euro, the strongest since November 28, before fetching 161.23 from 161.40. The currency may strengthen to 106 a dollar and 153.70 a euro at the end of March, Harr forecast.

Yuan gains on US growth concerns
The Chinese yuan rose to the strongest since a link to the dollar was scrapped in July 2005 on concern the US economy is losing momentum.

The yuan was the best performer against the dollar today among the 10 most active Asian currencies after a report yesterday showed manufacturing in the US shrank the most in almost five years. The report led traders to raise bets the Federal Reserve will cut interest rates again this month to avoid a recession.

"The reports from the US really disappointed and the yuan is gaining on the back of that,'' said Magnus Prim, chief foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. "I expect the pace of yuan appreciation to quicken this year.''

The yuan rose 0.29 per cent to 7.2725 a dollar as of the 5:30 pm close in Shanghai, according to the China Foreign Exchange Trade System. The currency reached 7.2721, the strongest since the peg ended.

The yuan strengthened 7 per cent last year as policy makers sought to curb inflation, which is at an 11-year high, and reduce a record trade surplus.

Singapore dollar rises to the highest in 10 years
The Singapore dollar rose to a 10-year high, leading Asian currencies stronger, on speculation the central bank will allow faster gains to curb inflation as oil trades near a record. The Monetary Authority of Singapore holds a policy of seeking a stronger currency to keep inflation from accelerating, as consumer prices rose at the fastest pace in more than 25 years in November.

The currency rose even as a report yesterday showed the island's economy unexpectedly shrank last quarter for the first time in 4 1/2 years.

"We expect the Singapore dollar policy to still be focused on inflation rather than growth,'' analysts at UBS AG including Ashley Davies in Singapore wrote in a note to clients. "The Singapore dollar remains the only tool the MA S has in curbing inflation.''

The Singapore dollar advanced to S$1.4337 as of 5:18 pm local time, from S$1.4396 yesterday, according to data compiled by Bloomberg.

Malaysia's ringgit rose on speculation the Federal Reserve will cut US interest rates this month, spurring investor demand for emerging-market assets.

'Adding Allure'
The currency climbed to near the strongest since October 1997 after Fed officials said growth in the world's biggest economy will fall short of their forecast for 2008, according to minutes of their December policy meeting released yesterday. Traders raised bets the Fed will lower its key rate a quarter-point when they meet on January 30.

"The market perception is that the Fed will have to do something this month,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. "That's adding allure to some Asian currencies.''

The ringgit advanced 0.6 per cent to 3.2900 a dollar in Kuala Lumpur, compared with 3.3105 late yesterday, according to data compiled by Bloomberg.

Indonesia's rupiah was the only loser amongst 10 of the most active currencies outside of Japan today on speculation demand for dollars will increase as crude oil reached a record.

The currency fell after crude climbed to $100 a barrel in New York, raising costs for state-owned PT Pertamina to import the fuel. Indonesia subsidizes oil to keep prices affordable to consumers, putting pressure on the budget deficit.

"There's speculation that Pertamina is cutting domestic oil prices and that's sending a negative signal for the budget and rupiah,'' said Kevin Muchlis, a currency trader in Jakarta at PT Bank Mandiri, the nation's biggest lender.

The currency declined to 9,410 a US dollar, from 9,390 yesterday, according to data compiled by Bloomberg.

Indonesia is the only net oil importer among OPEC's 12 oil- producing members.

Elsewhere, the Philippine peso strengthened 0.3 per cent to 41.095 and the Thai baht rose 0.4 per cent to 33.44 in onshore trading. The Vietnamese dong declined 0.1 per cent to 16,011 and the Taiwanese dollar was little changed at NT$32.431.