Won leads rally as subprime woes ease

ASIAN CURRENCIES ROUND-UP

Asian currencies rose, led by South Korea's won, as investors bought emerging-market assets after concerns eased that US subprime mortgage losses will slow global economic growth.

US government reports on August 24 showed gains in new home sales and durable goods orders in July both beat economists' forecasts. US banks borrowed $1.2 billion a day on average last week, the most since 2001, after the Federal Reserve cut its lending rate to them on August 17 to ease a shortage of cash.

"The Fed has done its part in soothing the market fear,'' said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank in Kuala Lumpur. "Sentiment and risk appetite have improved in regional stocks and currencies.''

The won rose 0.3 per cent to 938.60 against the dollar as of the 3 pm close, according to Seoul Money Brokerage Services. Malaysia's ringgit climbed 0.1 per cent to 3.4838, according to data compiled by Bloomberg.

Meanwhile, the Japanese yen rose, snapping a three-day decline against the dollar and euro, as investors pared riskier investments funded by loans in Japan on speculation the US housing slump will extend its drag on credit markets.

The yen gained against 15 of the 16 most-traded currencies as the so-called carry trades unwound before a US government report that's forecast to show sales of previously owned homes fell in July for a fifth month. The yen was also supported by speculation Japan's new Chief Cabinet Secretary Kaoru Yosano will favour an interest-rate increase.

"Risk aversion remains high and people are buying yen again,'' said Robert Fullem, manager of corporate foreign exchange sales with the Bank of Tokyo-Mitsubishi UFJ in New York. "The environment is not really conducive for putting on carry-trade positions.''

The yen rose 0.6 per cent to 158.37 a euro at 9:34 am in New York from 159.26 on August 24. Japan's currency also gained 0.4 per cent to 116.02 a dollar from 116.44. Moves were exaggerated as some speculators avoided taking positions because of a public holiday in the UK. The dollar strengthened 0.2 per cent to $1.3647 a euro from $1.3675.

The Kuala Lumpur Composite Index of shares increased 0.2 per cent and South Korea's Kospi index of stocks 0.7 per cent. Overseas investors bought more Korean shares than they sold for the first time since AugUst 10.

"The situation with the subprime problem has become better, helping the won,'' said Hee Kim, a trader at Korea Development Bank in Seoul. "The stock market also bounced back.''

Elsewhere in Asia, the Singapore dollar gained 0.3 per cent to S$1.5194 and Thailand's baht was at 34.38 in onshore trading. Indonesia's rupiah climbed 0.2 per cent to 9,390. The Taiwan dollar was little changed at NT$32.994, according to Taipei Forex Inc. Markets in the Philippines were closed for a holiday.

Indonesia's central bank said it expected the rupiah to trade between 9,000 and 9,300 to a dollar.

"Around 9,000 is the most ideal level to our economy,'' Governor Burhanuddin Abdullah told reporters in the state palace today. "Bank Indonesia will continue to guard the rupiah in the market in any situation.''

Asian stocks advanced, set for the highest close in two weeks, after the US economic reports eased concern losses from subprime home loans will slow growth.

The Morgan Stanley Capital International Asia-Pacific Index added 1.1 per cent.

"It's a positive thing that we're seeing a recovery in the stock market, which signals the risk aversion is withdrawing somewhat,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. "It will tend to benefit regional currencies.''