Yen falls on carry trades, while yuan gains

ASIAN CURRENCIES ROUND-UP

The yen fell against 11 of the 16 most-active currencies as a rally in Asian stocks encouraged investors to buy higher-yielding assets with loans made in Japan.

The Japanese currency pared its biggest monthly advance in more than four years against the dollar as Japanese importers bought foreign exchange to pay their bills.

Japan's currency declined to 106.47 per dollar at 9:13 a.m. in London, from 106.27 yesterday in New York, and has dropped 4.7 per cent this month, the most since September 2003. It also slipped to 158.07 against the euro from 157.93.

The yen declined against currencies that are targets of so-called carry trades as Asian stocks reversed earlier losses. The MSCI Asia Pacific Index of regional shares gained 1.6 per cent after falling as much as 0.6 per cent.

The yuan posted a record monthly gain against the dollar on speculation China allowed the currency to appreciate faster to curb inflation.

The currency rose to the highest since the link to the dollar was abandoned as the worst snowstorms in five decades led to a surge in food prices, aggravating inflation that is already above the central bank's target. The government is allowing gains to cut the cost of imported grain, soybeans and palm oil.

The yuan gained 0.14 per cent to 7.1818 per dollar as of the 5:30 p.m. close in Shanghai, from 7.1916 yesterday, according to China Foreign Exchange Trade System. It reached a high of 7.1815 and has gained 1.7 per cent this month.

The South Korean won led monthly declines among Asian currencies on speculation credit-market losses and a slowdown in the US prompted investors to reduce holdings of higher-yielding assets.

The local currency weakened a third month as the country's main stock index slumped the most since October 2000 on concern bond insurers guaranteeing $2.4 trillion in securities worldwide will lose their highest ratings.

The won closed at 943.90 per dollar at 3 p.m. local time, according to Seoul Money Brokerage Services. That compares with 944.60 yesterday and 936.05 a month ago.

The ringgit traded at 3.2355 per dollar, according to data compiled by Bloomberg, versus 3.2375 late yesterday and 3.3073 a month ago. Eight of Asia's 10 most-traded currencies strengthened against the U.S. dollar today.

The Philippine peso headed for a fifth monthly gain as the central bank cut its benchmark interest rate today, the fourth reduction in as many months. The peso traded at 40.555 against the dollar, from 40.72 late yesterday, according to data compiled by Bloomberg. It has risen 1.8 per cent this month.

Bangko Sentral ng Pilipinas lowered its overnight borrowing rate by a quarter-percentage point to 5 percent, as expected by eight of the 18 economists surveyed by Bloomberg News.

Elsewhere, the Taiwanese dollar gained 0.8 per cent to NT$32.198 this month, while Vietnam's dong rose 0.2 per cent in the past four weeks to 15,972. The Thai baht advanced 2 per cent to 33.04, its fifth winning month.