Yuan gains, rupiah at 3-month high

ASIAN CURRENCIES ROUND-UP

China's yuan led gains among Asian currencies on increased pressure for the government to widen the band in which the currency is allowed to trade.

The yuan rose by the most in more than six weeks after a local magazine reported Yang Yuanjie, a scholar with the Finance Ministry's research institute, as saying the country should increase the band as the economy can hardly stand a "one-off'' appreciation. Singapore's dollar and Indonesia's rupiah also strengthened.

"Widening the trading band is more intuitive,'' said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. "ny form of one-off move would get markets focused on additional one-off moves, which is not what the authorities want.''

The yuan gained 0.28 per cent to 7.1623 a dollar as of the 5:30 pm close in Shanghai, from 7.1825 on February 15, according to China Foreign Exchange Trade System. The central bank set the highest reference rate for daily trading since a decade-old peg was scrapped, spurring the biggest advance in the currency since January 3. Evans of State Street forecast that the yuan will rise to 6.8 by the end of June and 6.5 by year-end.

Indonesia's rupiah gained on optimism a higher credit rating will prompt global investors to add to their holdings of local assets. The currency advanced to the highest in more than three months after Fitch Ratings on February 14 raised Indonesia's credit rating to BB, two levels below investment-grade, the country's best since the Asian financial crisis in 1997.

'Good News'
"The credit rating upgrade is good news for the rupiah,'' said Rully Nova, a currency trader at PT Bank Himpunan Saudara in Jakarta. "This should continue to boost foreign demand for local stocks and bonds.''

The rupiah traded at 9,168 a US dollar, compared with 9,167 on February 15, according to data compiled by Bloomberg. Its 2.7 per cent gain this year makes it the second-best performer among Asia's 10 most traded currencies excluding the yen. Singapore's dollar climbed 0.1 per cent to $1.4115 against the US currency, while the Philippine peso gained 0.2 per cent to 40.665.

Malaysia's ringgit traded near the highest level since November 1997 on speculation the central bank will allow more currency gains to help cool inflation.

The currency may extend its advance before a government report on February 20 that is forecast by economists to show the inflation rate in January held near a 10-month high. Consumer prices rose 2.4 per cent last month, matching the pace in December that was the fastest since February 2007, according to the median estimate of 18 economists surveyed by Bloomberg News.

'Faster Inflation'
"Central banks generally would prefer not to touch interest rates in the face of faster inflation and slowing growth,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank in Kuala Lumpur. "For the ringgit, the key is to ensure the appreciation doesn't get out of line.''

The ringgit traded little changed at 3.2205, according to data compiled by Bloomberg. It has risen 2.7 per cent this year and reached a decade high of 3.22 a dollar on February 15.

South Korea's won traded near its lowest in a week on speculation overseas investors will repatriate funds from their stock sales after offloading shares every day this year except three.

The won may add to a 1.3 per cent loss this year as Korean companies prepare to pay dividends to investors abroad in March and April. Lehman Brothers Holdings Inc. cut its economic growth forecast for Korea in 2008, saying a global slowdown may damp exports and investment.

'Dollar Demand'
"There may be some demand for the dollar from foreign investors who sold shares,'' said Park June Geun, a currency dealer with BNP Paribas in Seoul. "Still, any sharp loss in the won may be limited as shipbuilders are ready to sell'' the dollar on highs.

The Korean currency traded at 945.35 against the dollar, compared with 945.10 on February 15, according to Seoul Money Brokerage Services.

The Philippine peso advanced against the dollar before the Senate resumes an investigation into the alleged corruption of senior officials.

The currency traded near its strongest level in four days before the Senate restarts the inquiry today into a $329 million communications project awarded by the government to China's ZTE last year. The project was later canceled by President Gloria Arroyo.

"Everyone is adopting very neutral positions as they await for further clues that would trigger a shift in sentiment,'' said Jonathan Ravelas, an economist at BDO Unibank in Manila.

Elsewhere, Vietnam's dong held at 15,956 a dollar, while the Thai baht was little changed at 32.53 onshore.