Asian currencies weakened, led by South Korea’s won and the Philippine peso, on concern China’s interest-rate increase will slow its economy, damping demand for the region’s exports. The People’s Bank of China raised one-year lending and deposit rates yesterday by a quarter of a percentage point to 6.06 percent and 3 percent respectively. The North Asian country is the largest market for exports from South Korea, Taiwan and Thailand, according to government data. Overseas sales account for about half of the Korean economy and two-thirds of Thai and Taiwanese gross domestic product. “In the longer term, there will be some impact on exports from a slowdown in China,” said Norawit Suparinayok, a foreign- exchange trader at Bangkok Bank Pcl. “That is reflected by some of the regional currencies today.” The won dropped 0.4 percent to 1,108.85 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Philippine peso fell 0.4 percent to 43.565, the Singapore dollar weakened 0.2 percent to S$1.2750 and Malaysia’s ringgit lost 0.2 percent to 3.0380. South Korea’s exports climbed 46 percent in January from a year earlier with China buying 15 percent of the total, official data show. Asia’s biggest-economy purchased about 12 percent of Malaysia and Thailand’s overseas shipments in December, according to government data. The won advanced as much as 0.2 percent earlier on speculation the central bank will raise borrowing costs this week and allow gains in the currency to curb rising prices. The Bank of Korea may lift its benchmark interest rate by a quarter of a percentage point to 3 percent on Feb. 11, according to nine of 12 economists surveyed by Bloomberg. Three expect no change. Preemptive Move Finance Minister Yoon Jeung Hyun said today the government needs to act “preemptively” to curb inflation as price gains can weaken the foundation of a stable economy. President Lee Myung Bak declared “a war against inflation” last month, saying it must be contained at 3 percent to protect people on low incomes. Inflation in January accelerated to 4.1 percent from a year earlier, compared with 3.5 percent in December, breaching the central bank’s 4 percent ceiling. China’s yuan was unchanged at 6.5938 from Feb. 1, the last day of trading before the Lunar New Year holiday, after strengthening as much as 0.18 percent earlier. A government report next week will show consumer prices in China gained 5.3 percent from a year earlier in January, compared with 4.6 percent in December, according to the median estimate in a Bloomberg News survey. That would be the fastest inflation since July 2008. Inflation Concern The yuan will appreciate 4.7 percent to 6.30 per dollar by the end of the year, according to the median forecast of analysts in a Bloomberg survey. It climbed 0.6 percent in the week after the interest-rate increase on Dec. 25. “Asian central banks outside Japan are more concerned about inflation so it makes sense the currencies are allowed to appreciate to damp imported inflation,” said Robert Minikin, a senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong. “Before too long, we will start seeing the fixing rate to move decisively stronger.” Elsewhere, the Indian rupee weakened 0.2 percent to 45.41 per dollar, according to data compiled by Bloomberg. Thailand’s baht was little changed at 30.72, compared with 30.71 yesterday, while Taiwan’s dollar gained 0.2 percent to NT$29.10. To contact the reporters 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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