Yuan rises ahead of Paulson's visit

ASIAN CURRENCIES ROUND-UP

The yuan strengthened for a second day ahead of a visit by US Treasury Secretary Henry Paulson this week when he's likely to keep up the pressure on China to allow faster gains in the exchange rates.

China's currency also rose by the most in more than a week against the dollar on speculation the central bank will raise interest rates to cool inflation after increasing banks' reserves at the weekend.

China may let the yuan advance at a quicker pace to appease Paulson who visits China on December 12-13, just as the nation did when European officials visited in November, said Ben Simpfendorfer at Royal Bank of Scotland Group in Hong Kong.

The currency rose 0.11 per cent to 7.3952 a dollar as of the 5:30 pm close in Shanghai from 7.4030 on December 7, according to the China Foreign Exchange Trade System. The yuan trimmed a gain of as much as 0.17 per cent.

Ringgit advances
Malaysia's ringgit touched the strongest in a month on speculation that an interest-rate cut in the US tomorrow will boost demand for Asian assets.

The currency extended a three-week gain as traders maintained bets the US Federal Reserve will lower borrowing costs by a quarter percentage point to help avert a slowdown in the world's biggest economy. Malaysia ships about one-fifth of its exports to the US, its largest overseas market.

"A rate cut means a bias for a weaker US dollar and the ringgit will benefit from potential capital inflows,'' said Sivanesan Muthusamy, head of treasury dealing at EON Bank in Kuala Lumpur. "We may only get a quarter point, so we are are not likely to see a strong reaction.''

The ringgit traded at 3.3250 a dollar as of 12:10 pm in Kuala Lumpur, after touching 3.3190, according to data compiled by Bloomberg. The local currency posted gains after the US reduced rates on September 18 and October 31.

The Fed is certain to cut its overnight rate for loans between banks to 4.25 per cent from 4.5 per cent at tomorrow's meeting, according to interest-rate futures traded on the Chicago Board of Trade.

Yet to Peak
Malaysia's exports expanded at the fastest pace in 11 months in October. The increasing overseas shipments boosts demand for the local currency from exporters.

The Philippine peso sustained its longest rally in almost seven months on speculation that inflows from remittances and investments are yet to peak.

The currency, trading at its highest in 7 1/2 years, rose for a seventh day amid record remittances, which account for a 10th of the Southeast Asian nation's economy. Money sent home by Filipinos working abroad helped to fuel consumer spending and drive the economic growth.

"Remittance flow has yet to peak,'' said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking in Manila.

The currency rose 0.2 per cent against the US dollar to 41.665 in Manila, according to Tullett Prebon, the world's second-largest inter-dealer broker. It's trading at its highest since May 2000.