Yuan falls, yen near 3-week low

ASIAN CURRENCIES ROUND-UP

The yuan fell the most since China ended a fixed exchange rate in 2005, damping speculation that gains would accelerate before a visit by US Treasury Secretary Henry Paulson next week.

The yuan tracked declines in the yen and the euro, components of the basket against which the currency is managed.

Paulson yesterday said the yuan's 11.7 per cent advance since the end of the peg in July 2005, still isn't "fast enough'' to address global trade imbalances.

The currency fell 0.29 per cent to 7.4095 a dollar as of the 5:30 pm close in Shanghai from 7.3880 yesterday, according to the China Foreign Exchange Trade System. It declined as much as 0.38 per cent. Against the euro, the yuan rose 0.7 per cent to 10.7963.

A record trade surplus and inflows of speculative capital betting on faster yuan gains have pushed up China's foreign exchange reserves to $1.43 trillion, fuelled asset bubbles and driven up inflation.

The world's fourth largest economy expanded 11.5 per cent in the third quarter from a year earlier. Consumer prices rose 6.5 per cent in October, the most in a decade.

Yen near three-week low versus dollar on US economic outlook
The yen traded near a three-week low against the dollar after US employment and factory reports signaled the world's biggest economy may avoid recession.

The currency fell versus the New Zealand and Australian dollars as investors resumed so-called carry trades and bought higher-yielding assets funded from Japan.

The dollar was also near the strongest in almost three weeks against the euro after US regulators agreed to freeze interest rates on subprime mortgages, a person familiar with the talks said.

"Investor sentiment has improved a bit,'' said Hideaki Inoue, chief manager of derivatives and fixed-income investment at Mitsubishi UFJ Trust and Banking, in Tokyo. "They're showing some appetite for higher-yielding currencies.''

The yen traded at 111.03 a dollar at 6:09 am in London compared with 110.89 late yesterday in New York. It was unchanged at 162.04 against the euro. The yen may drop to 111.50 per dollar and 162.50 per euro today, Inoue forecast.

The US currency rose to $1.4574 versus the euro, the highest since November 13, before trading little changed from yesterday at $1.4610. Goldman Sachs, the world's biggest securities firm by market value, abandoned a bet the dollar will fall against a basket of euros and yen.

The job market is "looking less supportive for our short- dollar trade recommendation,'' Goldman economists Jens Nordvig and Thomas Stolper wrote in a research note yesterday. A short position is a bet on a decline.

Asian Currencies: Peso gains on fund Inflows; Korean Won rises
The Philippine peso advanced the most among the 10 most actively traded Asian currencies as overseas investors bought the nation's stocks.

The peso had its highest close since May 2000 as a freeze on interest rates on US subprime mortgages and jobs data that was three times better than analysts expected eased concerns about slowing growth in the US. Speculation that money sent home from Filipinos working overseas is increasing toward year-end also helped support the currency.

"Concerns over emerging markets are easing and some funds are probably reinstating positions in the Philippines,'' said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila. "Together with remittances, this is pushing the peso higher.''

The currency gained 0.4 per cent to 41.865 a dollar at the 4 pm close of trading in Manila, according to Tullett Prebon, the world's second largest inter-dealer broker.

The Philippine economy may expand 7 per cent this year, according to the government's economic planning secretary Augusto Santos. That would be the fastest since 1976, based on Bloomberg data.

Growth is being driven by remittances, which account for about a 10th of the economy. Money sent home increased 9.2 per cent in the third quarter from a year ago, the government said on November 29.

The peso has gained 17 per cent this year, while the Philippine benchmark stock index has climbed 25 per cent. Overseas investors bought more Philippine equities than they sold today for the first time in four days, stock exchange data show.

South Korea's won strengthened on speculation that exporters converted their dollar holdings into the local currency.