Won Leads Gains by Asian Currencies on Greek Debt Progress; Rupiah Slides

South Korea’s won led gains in Asian currencies as optimism grows that Greece will meet requirements for further aid, reducing demand for the relative safety of the dollar.

Greece made “good progress” in a second round of talks with the European Union and the International Monetary Fund to stave off default, the EU said in a statement. Indonesia’s rupiah and Taiwan’s dollar fell on speculation foreign funds are reducing their holdings of emerging-market assets after the IMF cut its global growth forecast.

The won strengthened 0.2 percent to 1,146.71 per dollar as of 11:59 a.m. in Seoul, according to data compiled by Bloomberg. China’s yuan climbed 0.09 percent to 6.3786. The rupiah dropped 0.3 percent to 8,933 and Taiwan’s dollar declined 0.1 percent to NT$29.907.

“European debt woes eased a little, calming down markets,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Still, investors will remain cautious.”

The won snapped a two-day decline of more than 3 percent after a government report showed Korea’s unemployment rate fell to 3.1 percent in August, the lowest level since July 2008 and less than the 3.3 percent median estimate in a Bloomberg survey of economists. Finance Minister Bahk Jae Wan said at a government meeting today that the data reflects “strong” economic fundamentals and is a “big surprise.”

The yuan advanced to the strongest level in three weeks on signs policy makers will tolerate currency gains to fight inflation in the world’s second-largest economy.

Chinese Inflation

The People’s Bank of China set the reference rate 0.17 percent stronger at 6.3772 per dollar, the highest since a dollar peg ended in 2005. Consumer prices in the nation climbed 6.2 percent in August from a year earlier after having increased 6.5 percent in July.

The Dollar Index, a gauge of the greenback’s strength, fell on speculation the Federal Reserve will increase holdings of longer-maturity bonds.

“Investors expect the dollar will keep weakening on further stimulus measures,” said Kenix Lai, a senior market analyst at Bank of East Asia Ltd. in Hong Kong. “The yuan will continue with its appreciation trend on China’s inflation fight, despite the slowdown in the global economy.”

The rupiah declined to near a seven-month low as the prospect of Europe’s debt crisis slowing world economic growth reduced demand for emerging-market assets.

IMF Forecast

The global economy will expand 4 percent this year and next, the International Monetary Fund said in its World Economic Outlook report, compared with June forecasts of 4.3 percent for 2011 and 4.5 percent for 2012. The U.S. economy will expand 1.5 percent in 2011 instead of 2.5 percent, it said.

The rupiah has weakened 4.5 percent in September as overseas holdings of the country’s government bonds fell 5.3 percent to 234.18 trillion rupiah ($26.2 billion) as of Sept. 19, debt management office data show. Foreign funds sold $440 million more Indonesian shares than they bought this month through yesterday, according to exchange data.

“On the domestic front investors have been selling equities and bonds,” said Mika Martumpal, a currency analyst at PT Bank Commonwealth in Jakarta. “Europe’s debt crisis continues to drive market sentiment and it has hit all major currencies in the region.”

Elsewhere, Thailand’s baht, the Philippine peso and Malaysia’s ringgit were little changed at 30.43, 43.463 and 3.1124, respectively.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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