Asia Currencies: Ringgit Slips on U.S. Rate Outlook; Won Gains

By David Yong and Yumi Teso

March 16 (Bloomberg) -- Malaysia’s ringgit weakened, leading declines in Asian currencies, on speculation the U.S. will signal an end to its near-zero interest-rate policy, shoring up demand for dollars.

The ringgit and Indonesia’s rupiah slid for a second day as some economists forecast the Federal Reserve will start raising borrowing costs as early as June, according to a Bloomberg News survey conducted from March 1 to March 10. Asian currencies fell yesterday after Chinese Premier Wen Jiabao on March 14 said the yuan isn’t undervalued and criticized calls for appreciation. Thailand’s baht rallied to a 21-month high on stock inflows.

“The expectation is shifting for a change in U.S. rate policy, and that’s supporting the dollar,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “A lot of bets are unwinding for yuan appreciation, which means more disappointment in store for the ringgit and other regional pairs.”

The ringgit fell 0.1 percent to 3.3230 per dollar as of 12:26 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It has retreated 1 percent since last week reaching 3.2910, the strongest level since August 2008. The rupiah dropped 0.2 percent to 9,180, after yesterday touching a two- month high of 9,140.

The Federal Reserve will meet today amid speculation more members will dissent from its commitment to maintain near-zero rates for an “extended period.” Reports this month showed improvements in retail sales, factory production and labor markets in the world’s largest economy.

Yuan Pressure

Democratic lawmakers are prodding President Barack Obama to take a tougher line on China’s currency policy by drawing up legislation and convening hearings on the yuan’s effects on U.S. companies.

Some U.S. arguments on the currency exchange rate are “groundless”, and China’s trade surplus shouldn’t be used to justify calls for yuan appreciation, Ministry of Commerce spokesman Yao Jian told reporters in Beijing today.

Non-deliverable 12-month yuan forwards weakened 0.1 percent to 6.6561 per dollar in Hong Kong, after yesterday slipping 0.4 percent. The yuan’s spot rate was little changed at 6.8263.

Thai Inflows

The Thai baht advanced 0.3 percent to 32.45 per dollar, the strongest since June 2008, after overseas investors yesterday bought more local shares than they sold for a 15th day, the longest stretch of net purchases since October 2006. Foreigners have bought $621 million more of the nation’s equities than they’ve sold this month, exchange data show.

Anti-government protesters re-affirmed they would stick to non-violent methods in their bid to oust Prime Minister Abhisit Vejjajiva. Thailand’s economy, Southeast Asia’s largest after Indonesia, emerged from a yearlong recession in the last quarter, expanding 5.8 percent from the same period of 2008.

“For overseas investors, the growth story is more important than the political concerns unless the protest becomes violent or escalates further,” said Takashi Yamamoto, chief trader in Singapore at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s biggest lender. “The baht will see continued appreciation pressure as money comes into the country.”

Korea’s won climbed 0.1 percent to 1,133.80 in Seoul after falling the most in two weeks yesterday on speculation overseas demand for the currency will be boosted by the sale of a stake in Hynix Semiconductor Inc.

Creditors to Hynix, the world’s second-largest maker of computer-memory chips, sold a 6.7 percent stake to domestic and foreign institutional investors for 923 billion won ($814 million), Korea Exchange Bank said today. The lenders, seeking to recoup $4.6 billion spent bailing out Hynix, had planned to sell an 8 percent stake in the chipmaker in the first half of the year and another 5 percent in the second half.

“If foreigners want to buy Hynix stock, they have to sell dollars to get the Korean won,” said Kim Yule, a Seoul-based currency trader at BNP Paribas SA. “The government is watching the downside on the dollar as there’s some selling pressure due to the Hynix deal.”

Elsewhere, Taiwan’s dollar traded at NT$31.806 versus the greenback from NT$31.820 yesterday. The Vietnamese dong strengthened 0.4 percent to 19,000 and the Philippine peso slid 0.1 percent to 45.753.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.

Last Updated: March 16, 2010 00:42 EDT