Asian Currencies Gain After PBOC Calls for Monetary Tightening

Asian currencies rose for a second straight day as the yuan gained on speculation China will raise borrowing costs and a rebound in consumer confidence in South Korea boosted sentiment.

The Bloomberg-JPMorgan Asia Dollar Index hovered near its highest level this week after Deputy Governor Hu Xiaolian said yesterday the People’s Bank of China will use quantitative and price tools to manage liquidity. A South Korean central bank poll conducted before North Korea lobbed shells at a South Korean island on Nov. 23 showed consumer confidence rebounded from a 16-month low.

“We are waiting for another interest-rate increase alongside a rise in reserve-requirement ratios by the end of this year” in China, said Gerrard Katz, head of foreign- exchange trading at Standard Chartered Plc in Hong Kong. “In that environment, we should see some yuan appreciation.”

The won gained 0.4 percent to 1,137.65 as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. Malaysia’s ringgit rose 0.3 percent to 3.1300 and Singapore’s dollar climbed 0.4 percent to S$1.3071.

South Korea’s currency snapped a two-day decline as the benchmark Kospi index of shares gained. The Bank of Korea said that the consumer sentiment index rose to 110 this month from 108 in October. The won is now little changed from its closing level on Nov. 23, when North Korea mounted an artillery attack on its southern neighbor.

‘Shock Faded’

“The stock market is stable,” said Sam Hong, a currency dealer at Shinhan Bank in Seoul. The “shock” over the incident with the North has faded, he said.

The yuan rose for the first time in a week, climbing 0.1 percent to 6.6495. The PBOC’s Hu said in a statement China will control the pace of bank lending for the remainder of this year as it will be difficult to stay within the government’s 7.5 trillion yuan ($1.1 trillion) target for new loans in 2010. The benchmark money-market rate climbed 15 basis points to 2.48 percent, the highest level since Oct. 8.

“The expectation of an interest-rate hike is pushing money markets up,” said Chris Leung, a Hong Kong-based senior economist at DBS Bank Ltd. Interest rates could climb a quarter of a percentage point by the end of the year, Leung said.

The ringgit snapped a two-day decline after the U.S. reported yesterday the fewest jobless claims since 2008. The world’s biggest economy accounted for about 10 percent of Malaysia’s exports this year through September, official data showed.

Philippine Data

“This is important because the U.S. remains an important driver of Asia’s export-led economies,” said Yeah Kim Leng, the Kuala Lumpur-based chief economist at RAM Holdings Bhd., Malaysia’s biggest ratings company.

The Philippine peso approached a two-month low of 44.285 per dollar after gross domestic product unexpectedly contracted 0.5 percent in the third quarter from three months earlier. The economy expanded 1.4 percent in the quarter ended June, and economists surveyed by Bloomberg had forecast 0.9 percent growth for the third quarter. The peso fell 0.3 percent to 44.100 per dollar.

“There’s some selling of the peso because of the weaker-than-expected GDP data,” said Radhika Rao, a regional economist at Forecast Pte. in Singapore.

Elsewhere, Indonesia’s rupiah rose 0.1 percent to 8,968 and Taiwan’s dollar was unchanged at NT$30.80 versus the greenback.