Yuan gains, while yen loses steam

ASIAN CURRENCIES ROUND-UP

China's yuan advanced for a second day as the People's Bank of China called for more stable currencies and flexible exchange rate mechanisms.

Emerging-market economies should maintain "stable currencies'' and adopt flexible exchange rates, said Governor Zhou Xiaochuan, in comments made available on the PBOC's web site today.

The yuan last month logged its biggest gain since the end of a link to the dollar in 2005, after officials in Europe and the US pressed for faster gains to temper trade imbalances.

The currency rose 0.14 per cent to 7.3880 a dollar as of the 5:30 pm close in Shanghai, from 7.3985 yesterday, according to the China Foreign Exchange Trade System.

Yen falls on efforts to curb subprime losses
The yen fell against the world's 16 most actively traded currencies as policy makers in the US and Europe step up efforts to stem the spread of subprime loan losses.

The yen dropped the most against the South African rand and the South Korean won as investors bought higher-yielding assets funded by the Japanese currency in so-called carry trades. The Daily Telegraph reported that UK may nationalize Northern Rock, which the Bank of England bailed out in September.

US regulators and banks are in talks to freeze interest rates on subprime mortgages for five years, a person familiar with the negotiations said. The rand climbed 1 per cent to 16.2726 yen and the won rose 0.8 per cent to 8.34479 won.

The US dollar gained to 87.14 cents against Australia's dollar from 87.37 cents late in New York after the Reserve Bank of Australia kept the interest rates on hold at 6.75 per cent and said that global growth was slowing.

Peso rises due to subdued inflation
The Philippine peso rose for a fourth day, its longest rally in eight weeks, after the government said inflation in November remained below target. The currency gained 0.2 per cent to 42.045 a dollar at 4 pm in Manila, according to Tullett Prebon, the world's second-largest inter-dealer broker.

Indonesia's rupiah rose for a fifth day on speculation that a drop in crude oil prices below $90 a barrel will lead to lower inflation, attracting overseas investors to stocks and bonds.

The rupiah strengthened 0.3 per cent to 9,263 from yesterday, according to data compiled by Bloomberg. The currency is one of the three worst performers among the 17 biggest economies in Asia over the past month as oil reached a record $99.29.

"The oil price didn't rise as aggressively as we had thought. said Branko Windoe, head of treasury in Jakarta at PT Bank Central Asia, Indonesia's second-largest lender. "It's leading to positive sentiment vis-a-vis the rupiah. The expectation is that oil prices may decline further. So pressure on inflation won't be as big as what the market expected.''

Won weakens on lower growth projections
South Korea's won weakened for a second day this week after the central bank said that economic growth will slow down next year, boosting speculation that investors will stay away from the country.

The won has slumped 1.8 per cent in the past month, the worst performance among the 10 most actively traded currencies in Asia outside Japan.

Indonesia's rupiah, India's rupee and Hong Kong's dollar have also fallen over the period on concerns that subprime-related losses will damp the demand for emerging market assets.