Yen, yuan gain on further US Fed rate cut buzz

ASIAN CURRENCIES ROUND-UP

The yen rose against all 16 of the most-active currencies as credit-market losses spurred investors to cut holdings of higher-yielding assets funded in Japan.

The dollar also snapped two days of gains versus the yen on speculation the Federal Reserve will cut interest rates by 50 basis points today.

The yen, the best-performing major currency so far this year, climbed to 106.78 against the dollar by 9:46 a.m. in London, from 107.11 yesterday in New York. It also rose to 157.83 per euro from 158.27.

BNP predicts the yen will rise further against the dollar to 104 by the end of March. Declines in higher-yielding currencies accelerated after the MSCI Asia Pacific Index fell 1.3 percent, reversing an earlier rally.

The yuan rose to the highest since the end of a link to the dollar in 2005 on speculation the worst snowstorms in five decades will exacerbate inflation, paving the way for faster currency gains. Bonds advanced.

The yuan gained to 7.1916 per dollar at the 5:30 p.m. close in Shanghai, from 7.1945 yesterday, according to China Foreign Exchange Trade System. The currency earlier reached 7.1911, the strongest since the peg was scrapped in July 2005.

Indonesia's rupiah led gains amongst Asian currencies on speculation a US interest-rate cut will bolster investor appetite for higher-yielding emerging-market assets.

The currency is headed for its best month since September and today advanced beyond 9,300 to the dollar for the first time since December 17. The rupiah climbed 0.2 per cent to 9,301 per dollar as of 3:33 p.m. in Jakarta, according to data compiled by Bloomberg.

The currency has strengthened 1 per cent this year. The Taiwanese dollar rose 0.2 per cent to NT$32.248. The South Korean won traded near a two-week high before today's Fed rate decision.

The won was little changed at 944.60 per dollar, according to Seoul Money Brokerage Services. It earlier touched 940, the highest since January 16.

Vietnam's dong was little changed at 15,977. The central bank will probably let its currency rise to the highest since October 2003 to combat inflation, Standard Chartered Plc says. The dong declined 31 percent from 1996 to 2006, when the government ended a decade-long policy of allowing it to weaken to support exports.

Among the losers in the region today was Malaysia's ringgit, which lost 0.1 percent to 3.2375 and the Philippine peso, which fell 0.3 percent to 40.750. The Singapore dollar was unchanged at S$1.42.