KR: Asian currencies rise on plans to support Greece
Asian currencies strengthened, led by Malaysia's ringgit and the Singapore dollar, as speculation the European Union will come up with measures to help Greece rein in its budget deficit supported demand for regional assets.
The ringgit and Korea's won advanced to one-week highs, and the MSCI Asia-Pacific Index of stocks rose for a third day before the EU leaders' summit in Brussels. European Central Bank President Jean-Claude Juncker said discussions were taking place toward "an answer that will satisfy the markets." Vietnam's dong dropped to a record low after the central bank devalued the currency for a second time since November to balance demand and supply of foreign exchange.
"The market is moving on euro headlines," said Zaki Mokhtar, head of currency spot trading at RHB Bank Bhd. in Kuala Lumpur. "People are waiting for some form of assurance or support for Greece. For sure, markets will be worse off if Greece is left on its own."
The ringgit rose 0.3 percent to 3.4190 per dollar as of 1:17 p.m. in Kuala Lumpur and reached 3.4180, according to data compiled by Bloomberg. Singapore's dollar appreciated 0.3 percent to $1.4114 and the Philippine peso gained 0.3 percent to 46.28.
Germany and France set the stage head of the Brussels summit today by working on options such as loan guarantees as long as Greek Prime Minister George Papandreou overcomes street protests and makes deeper cuts to the EU's biggest budget deficit of 12.7 percent of gross domestic product last year.
The MSCI Asia-Pacific Index climbed 0.9 percent, taking gains in the last three days to 1.5 percent.
"Some hopes are building up on Greece," said Vishnu Varathan, a regional economist at Forecast Singapore Pte. "But the market could easily swing from hope to caution."
Korea's central bank kept its benchmark interest rate unchanged at a record-low 2 percent yesterday, as expected by 14 of 17 economists surveyed by Bloomberg. Bank of Korea Governor Lee Seong-tae and two other committee members will be replaced in the coming three months when their terms expire.
"There's an outside risk that Governor Lee, with only two meetings to go, might want to slip in a rate hike in his final meeting, which would require some verbal discussion about keeping rates too low for too long," said Sean Callow, a Sydney-based currency strategist at Westpac Banking Corp. (Bloomberg)
