Yen near 7-wk low

ASIAN CURRENCIES ROUND-UP

The yen traded near a seven-week low against the dollar on speculation the Bank of Japan will refrain from raising interest rates after policy makers said risks to global economic growth are increasing.

Japan's yen has weakened against 9 of the 16 most-active currencies this year as the nation's central bank kept its benchmark lending rate at the lowest among major economies, prompting investors to seek higher yields elsewhere.

The yen traded at 114.27 a dollar at 6:09 pm in Tokyo from 114.13 in New York yesterday. It dropped to 114.49 on December 24, the weakest since November 7.

The currency was at 164.75 an euro from 164.40 yesterday. It touched 164.90 on December 24, the lowest since December 13.

The yen may move between 107 and 117 a dollar next year, Fujii forecast. Japanese 10-year government bonds rose as the Bank of Japan signaled it will refrain from raising interest rates and yields near a seven-week high lured buyers.

Yuan: Little changed as demand falls
The yuan was little changed on speculation Chinese trading companies are converting less foreign exchange toward year-end. Government bonds rose.

The local currency ended two days of gains after rising yesterday to the strongest since the end of its peg to the US dollar for a third straight day.

The central bank set the reference rate for daily trading of the yuan at the highest since the dollar link was scrapped in July 2005 on the first two days of this week after saying December 21 it was seeking to increase the currency's flexibility.

"The yuan will be relatively stable at the year-end as most companies should have finished their exchange of currencies earlier in the month,'' said Zhang Huangrui, a currency trader at Bank of China Trading Center in Shanghai.

The currency traded at 7.3327 a dollar as of 3:23 pm in Shanghai, from 7.3297 late yesterday, according to the China Foreign Exchange Trade System. The yuan rose 6.4 per cent against the US currency this year, after gaining 3.3 per cent in 2006.

Forward contracts show traders are betting on an 8.3 per cent advance in the yuan to 6.764 in the next 12 months. The median estimate of 28 analysts surveyed by Bloomberg News is for a rate of 6.9 by the end of 2008.

Philippine peso, Vietnamese dong advance
The Philippine peso rose, heading for its biggest annual gain since at least 1994, on speculation Filipinos working abroad are sending more money home.

The local currency has advanced 18.7 per cent against the dollar this year, the best performer in Asia, as remittances climbed to a record. Funds sent home by overseas Filipinos, which account for about a 10th of the $117 billion economy, increased 15.2 per cent in the first 10 months of the year.

"You still have a lot of inflows coming in, which adds to the supply of dollars and boosts the case for an appreciating peso,'' said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.

The peso strengthened 0.6 per cent to 41.28 a dollar as of 4:00 pm in Manila, according to prices from Tullett Prebon. The annual gain will be the most since Bloomberg began tracking the currency in 1994. Most financial markets in Asia were closed yesterday for the Christmas holiday.

Asian currencies may appreciate an average of 5 to 10 per cent next year as economic policies help boost investment, said Philip Wee, senior currency economist at DBS Group Holdings in Singapore.

"Some of the countries that we're beginning to see investments picking up as a percentage of gross domestic product are Malaysia, Singapore, and even the Philippines and Indonesia,'' Wee said in a Bloomberg television interview.