Yuan records highest gain since peg was scrapped

ASIAN CURRENCIES ROUND-UP

China's yuan rose to the highest since a dollar peg was scrapped in 2005 before a report that economists say will show the nation's trade surplus rose to a record last year as exports surged. Bonds gained.

Some US lawmakers accuse China of deliberately keeping the currency undervalued to boost shipments overseas and have proposed sanctions unless yuan controls are loosened.

The central bank has pledged to boost the flexibility of the yuan to also quell inflation at an 11-year high and lower record foreign-exchange reserves, fueled by the export-led economic expansion.

The yuan closed at 7.2620 versus the dollar as of 5:30 p.m. in Shanghai, compared with 7.2643 at yesterday's close, according to data compiled by Bloomberg. It earlier touched 7.2614, the strongest since its link to the dollar was ended.

Yen
The yen fell the most in two weeks against the euro as Japanese investors increased purchases of higher-yielding assets.

The yen weakened against all 16 of the most-active currencies as selling by individuals reached a two-month high this week, according to the Tokyo Financial Exchange, Japan's largest financial futures market.

Traders also sought to boost returns after Asian stocks rebounded on speculation the US government will announce tax breaks to support the economy.

The yen dropped 0.4 per cent to 160.76 per euro as of 10:12 a.m. in London, the biggest decline since December 26, from 160.15 yesterday in New York. Against the dollar, the Japanese currency fell 0.3 per cent to 109.28, from 108.90. That cut the yen's gain against the dollar this year to 2.3 per cent.

Other currencies
Asian currencies rose, with Malaysia's ringgit climbing to the highest in a decade as the nation's stocks reached a record.

The ringgit advanced 1.3 per cent this year, the best start since the Asian financial crisis of 1997-98, as the benchmark share index increased 3.2 per cent, the most in Southeast Asia.

Economies in East Asia and the Pacific will expand 9.7 per cent this year and 9.6 per cent in 2009 as export demand and global growth improve, the World Bank said in its Global Economic Prospects report released today.

The currency rose 0.2 per cent to 3.2667 per U.S. dollar as of 5:10 p.m. in Kuala Lumpur, versus 3.2715 late yesterday, according to data compiled by Bloomberg. Markets are closed for a public holiday tomorrow.

The ringgit earlier fell as low as 3.2795 as a technical chart traders use to predict prices suggested the rally may falter.

The dollar's 14-day relative strength index was 28.5 versus the ringgit today, and reached 25.3 yesterday, based on data compiled by Bloomberg. A level below 30 or above 70 signals a reversal may occur.