Yuan bucks trend, moves upward

ASIAN CURRENCIES ROUND-UP

China's yuan traded near the highest since a dollar peg was scrapped in 2005 on speculation the central bank will use the currency's strength to curb inflation and prevent overheating in the world's fourth-largest economy.

The Chinese yuan rose this week even as some Asian currencies that the central bank uses to manage its exchange rate weakened against the dollar as global shares tumbled. China has loosened controls on the yuan, as US and European officials increased pressure to fix global trade imbalances.

"For the yuan, it is probably part of a policy to make it move with a greater flexibility this year," said Emmanuel Ng, a currency strategist with Oversea-Chinese Banking Corp. in Singapore. "We expect an 8 to 10 per cent pace of appreciation this year."

The yuan traded at 7.2392 per dollar as of the 5:30 p.m. close in Shanghai, compared with 7.2365 at yesterday's close, according to data compiled by Bloomberg. It reached 7.2324 on January 16, the strongest since China abandoned the dollar link in July 2005.

European finance ministers will tell their counterparts from the Group of Seven nations next month that China still needs to allow its currency to appreciate faster, according to the draft of a briefing document obtained by Bloomberg yesterday.

Asian currencies fell, led by the Philippine peso and South Korean won, as a slump in global stocks spurred investors to cut their holdings of emerging- market assets.

The peso extended its run of losses to the longest in 10 months and the won touched the lowest in more than a year on concern the US economy is heading for a recession, crimping global growth. Eight of the 10 most-traded Asian currencies slipped versus the dollar as the MSCI Asia Pacific Index of regional shares extended its slide since November to more than 20 per cent, following European equities into a bear market.

The peso fell almost 1 per cent to 41.60 per dollar as of the 4 p.m. close of onshore trading in Manila, according to Tullett Prebon Plc. The currency's six-day run of losses is the worst since March. The won declined 0.6 per cent to 954 per dollar after reaching 955.80, the weakest since October 2006. The won, which fell for a second day, is the worst performer this year of the 10 most active currencies in Asia outside Japan, losing 2.4 per cent.

Elsewhere, the Malaysian ringgit slipped 0.1 per cent to 3.2955 per dollar, the Singapore dollar fell 0.4 per cent to S$1.4510, Indonesia's rupiah dropped 0.4 per cent to 9,494, the Taiwan dollar weakened 0.3 percent to NT$32.439 and Thailand's baht fell 0.2 per cent in onshore trading to 33.19.

The Vietnamese dong was little changed at 15,981 against the U.S. currency.