Asian currencies strengthened, led by gains in South Korea’s won and Malaysia’s ringgit, on optimism European leaders will take decisive action to tackle a regional debt crisis that’s spurred demand for dollars. The Bloomberg-JPMorgan Asia Dollar Index rose from near a 10-month low and the MSCI Asia-Pacific Index of shares rebounded from its worst close since May 2010. An official said the European Central Bank may restart covered-bond purchases along with further measures to ease monetary conditions. U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will use more force to resolve their debt woes. “Rallies in global stock markets are helping Asian currencies today as sentiment improved a bit due to some news from Europe,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Whether this bounce will continue or not remains uncertain.” The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, rose 0.02 percent to 115.07 as of 11:26 a.m. in Hong Kong. A Sept. 22 close of 114.22 was the lowest since November 2010. The won strengthened 1.1 percent to 1,180.35 per dollar, while the ringgit advanced 1.1 percent to 3.1505, according to data compiled by Bloomberg. The Singapore dollar gained 1 percent to S$1.2881 and Indonesia’s rupiah climbed 1.3 percent to 8,943. Selloff ‘Overdone’ The Asia Dollar Index tumbled 3.8 percent this month, poised for its biggest loss since the Asian financial crisis in 1997. The MSCI index of regional shares dropped 10 percent, the most since October 2008. “There’s some rebound in risk appetite as the selloff in stocks and currencies was a bit overdone,” said Nik M. Khairul, a treasury dealer at Asian Finance Bank Bhd. in Kuala Lumpur. The ECB is under pressure to increase stimulus as Europe’s worsening debt crisis tightens conditions in money markets. The monetary authority purchased 60 billion euros ($81 billion) of covered bonds in a one-year program that expired in June 2010 and was aimed at freeing up banks’ balance sheets and encouraging lending during the region’s worst recession since World War II. German Chancellor Angela Merkel said on Sept. 25 that euro- region leaders must erect a firewall around Greece to avert market attacks on other European states. The Standard & Poor’s 500 Index jumped 2.3 percent in New York yesterday and the Stoxx Europe 600 Index advanced 1.9 percent. Yuan Strengthens China’s yuan gained 0.16 percent to 6.3906 per dollar, snapping a three-day drop, on speculation policy makers will allow currency gains to stem increases in consumer prices in the world’s second-biggest economy. Inflation cooled to 6.2 percent in August from a three-year high of 6.5 percent the previous month, official data show. The nation should maintain a proactive fiscal policy along with prudent monetary policy because it helps curb inflation, Jia Kang, head of the research institute for fiscal science under the ministry of finance, wrote in a commentary in the People’s Daily today. “Investors are buying into the market as European political leaders seem to be acting to stabilize the situation,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd. “Even if global economic growth falls sharply, China will continue to let the yuan gain to lower the cost of imports.” Elsewhere, Taiwan’s dollar rose 0.4 percent to NT$30.445. The island’s central bank will end a run of five interest-rate increases at a quarterly policy review on Sept. 29, according to 12 of 15 economists surveyed by Bloomberg. The rest predict another 0.125 percentage point rise. Thailand’s baht advanced 0.6 percent to 30.94. Bond and currency markets in the Philippines were closed today as Typhoon Nesat hit the nation. To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net 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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