Yen advances as stocks decline

ASIAN CURRENCIES ROUND-UP

The yen rose against all but two of the most active currencies as a slump in stock markets prompted the investors to cut holdings of higher-yielding assets funded in Japan.

Japan's currency climbed the most against the New Zealand dollar, a favorite of so-called carry trades, after Australia's Centro Properties Group slumped 76 per cent and said it's struggling to refinance debt because of the collapse in the US subprime housing market. The dollar rose against 14 of the 16 most actively-traded currencies.

The yen gained 0.9 per cent to 85.82 against the New Zealand dollar as the MSCI Asia Pacific Index lost 2.7 per cent to 152.75. The index has lost 5.1 per cent in three days. Stock markets in Europe opened weaker, with the main indices in Germany, the UK and France losing more than 1 per cent.

The Melbourne-based Centro suspended dividends and said in a statement it may have to sell assets, after lenders gave it until February 15 to renegotiate maturing debt. Traditional sources of funding are "shut for business,'' Chairman Brian Healey said.

Yuan falls, tracking declines in euro, pound
China's yuan fell against the dollar after declines in the euro and British pound, components of the basket against which the currency is managed. Bonds rose.

The yuan climbed the most in a month during the past five trading days as the US Treasury Secretary Henry Paulson said on December 13 the Asian nation "recognizes'' the need for greater currency flexibility. The dollar was the strongest in seven weeks against the euro and a two-month high against the pound.

Peso, won decline
The Philippine peso and the South Korean won declined, as concerns that the Federal Reserve will cut interest rates less than expected prompted investors to sell emerging-market equities.

The 10 most actively-traded currencies in Asia outside Japan dropped as stocks slumped on concerns that faster inflation will slow consumer spending in the region's biggest export market. Foreign investors were net equity sellers in South Korea, Taiwan and the Philippines, according to data from the stock exchanges.

"The dollar is strengthening across the board,'' said Hideki Hayashi, a foreign-exchange strategist at Shinko Securities in Tokyo. "The regional stocks slumped, leading to speculation that investors will dump Asian equities.''

The Philippine peso plunged 1.1 per cent to 41.655 at the 4 pm close of onshore trading, according to Philippine Dealing. South Korea's won closed at the lowest since September 11, down 0.4 per cent to 933.60, according to Seoul Money Brokerage Services.

The won may trade between 930 and 935 this week, Hayashi said.

Interest-rate futures on the Chicago Board of Trade show 80 per cent odds that policy makers will lower the target overnight banks lending rate by a quarter-point to 4 per cent in January, compared with 96 per cent chances a week ago.

"Given the potential inflation, the Fed will probably cut less,'' said Jonathan Ravelas, market strategist at BDO Unibank in Manila. "There will be some correction for emerging market currencies, including the Philippines.''