Yen trades near 6-week low

ASIAN CURRENCIES ROUND-UP

The yen traded near a six-week low against the dollar as Asian stocks gained, boosting demand for higher-yielding assets funded by loans from Japan.

Japan's currency has fallen against nine of the 16 major currencies this year as speculation that the Bank of Japan will refrain from raising interest rates spurred so-called carry trades. A US report this week may show durable-goods orders rebounded, suggesting the world's largest economy is weathering the worst housing slump in 16 years. Financial markets were shut in Japan today for a holiday.

The yen weakened to 114.07 a dollar as of 9:40 am in London, from 114.04 in New York on December 21 when it touched 114.21, the weakest since November 7. Japan's currency also dropped to 164.12 a euro, after falling to 164.19, the lowest since December 14, compared with 163.98 at the end of last week. The dollar was at $1.4388 a euro from $1.4382. The pound fell to 72.637 pence a euro, the lowest since the European currency was introduced in 1999.

The yuan climbed as high as 7.3399 a dollar today, the strongest since a dollar link was scrapped two years ago, from 7.3696 at the end of last week. The yen may decline to 115 a dollar and 164.60 a euro this week, Morriss forecast.

Yuan: Strongest rise since $ peg ended in 2005
The yuan climbed to the strongest since the dollar link was scrapped two years ago after the central bank said exchange-rate flexibility will increase, raising speculation it plans to widen the daily trading band.

Policy makers allowed the currency to rise 6.2 per cent in 2007, almost twice as much as last year, to cool an export-led expansion that has flooded banks with cash and driven inflation to an 11-year high.

US Treasury Secretary Henry Paulson this month said it is in China's interest to allow faster gains. The yuan is now limited to a 0.5 per cent move either side of a daily reference rate set by the central bank.

The yuan rose 0.3 per cent to 7.3475 a dollar at the 5:30 pm in Shanghai, bringing gains this month to 0.7 per cent.

The central bank set the reference rate at 7.3315 today, according to the China Foreign Exchange Trade System. The rate touched 7.3405 today, the highest since the peg ended in July 2005.

The People's Bank of China said in a statement on December 21 that it will let the market play a bigger role in setting the exchange rate.

The central bank put a proposal to the State Council, China's cabinet, to use currency gains to curb money supply, the official Securities Times reported today, citing an unidentified person from ``the authorities.'' The paper said the proposal, which included opinions of local and foreign economists, suggests approaches including a faster yuan gain over time and a "one-off" appreciation.

Asian currencies: Ringgit rises on growth
Malaysia's ringgit led Asian currencies higher on speculation accelerating economic growth and rising stock markets will prompt investors to increase holdings of the region's assets.

The ringgit has risen 5.7 per cent this year, a third year of gains, and central bank Governor Zeti Akhtar Aziz said December 19 the economy remains "on a steady growth path.'' The Singapore dollar, Chinese yuan and South Korean won rose as their benchmark share indexes advanced today.

"There will be money coming into the Asian region,'' said S Sharath, an analyst at MIDF Amanah Investment Bank in Kuala Lumpur. "The ringgit is becoming stronger.''

The currency rose 0.3 per cent to 3.3385 a US dollar as of 1:32 pm in Kuala Lumpur, compared with 3.3480 on December 21, according to data compiled by Bloomberg. The ringgit will rise to between 3.10 and 3.20 over the next year, Sharath said.

Elsewhere, the Vietnamese dong rose for the first time in three days after the central bank widened the currency's daily trading band. Markets were closed in Japan, Philippines and Thailand for national holidays.

The won gained 0.1 per cent to 939.10 per dollar, the Indonesian rupiah advanced 0.2 per cent to 9,411 and the Singapore dollar rose 0.2 per cent to S$1.4539. Consumer spending in the US, the region's biggest export market, rose more than forecast last month, a report showed December 21.

"Stock markets are going up and are gaining some momentum, helping emerging markets,'' said Kim Tae Wan, senior foreign- exchange dealer in Seoul at Kookmin Bank, South Korea's biggest lender. "That's helping the won rebound.''