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Capital Markets
August 2, 2007

Currencies advance, stocks rebound
Asian currencies recouped losses, with the Indonesian rupiah recovering from the weakest in more than a year, as regional stock markets rebounded, Bloomberg news reported.

South Korea's won closed higher after declining to a one- month low as the Morgan Stanley Capital International Asia Pacific Index of equities rose 0.2 percent after losing as much as 1.4 percent. Asian stocks mirrored movements in the Dow Jones Industrial Average, which had a late rally August 1.

``We're just watching the US markets at the moment and they had a good rise yesterday,'' said Catherine Tan, head of emerging markets at Forecast Singapore Ltd. ``We're not out of the woods though, and with all the possible contagion affects, Asian currencies may not be rising much more yet.''

The rupiah was at 9,292 against the dollar as of 3:45 pm on August 2 in Jakarta, little changed from the day before. The won swung between gains and losses before ending the day up 0.3% at 923.30 to the US currency, according to Seoul Money Brokerage Services Ltd. The Philippine peso rose 0.1% to 45.825.

The rupiah earlier declined as much as 0.4% and the won 0.2%.

The International Monetary Fund said turmoil in global financial markets, while posing a risk to economic growth, isn't ``unsettling.''

Australia's Treasurer Peter Costello said the 21-member Asia Pacific Economic Cooperation forum in Coolum, Australia, discussed ``the instability in world currency markets.'' Asian currencies have slipped this week as Bear Stearns & Cos. halted redemptions from a third hedge fund and Macquarie Bank Ltd. said investors in two of its high-yield funds may lose 25% of their money.

``Investors have lost risk appetite and they're selling part of their holdings in equities and bonds and that's taking its toll on Asian foreign-exchange rates,'' said Tomo Kinoshita, head of Asian economic research at Nomura Securities Co. in Hong Kong.

Malaysia's ringgit rose 0.1% to 3.4692 as Moody's Investors Service said the nation needs a smaller budget deficit and faster economic growth to earn its first credit rating upgrade since 2004.

Standard & Poor's on July 31 raised the outlook on the Southeast Asian nation's foreign currency borrowings to positive from stable, which means the company's first upgrade on Malaysia since 2003 is more likely. Moody's said on August 2 a stable outlook is more appropriate.

Elsewhere, the Singapore dollar held at S$1.5213 and the Taiwan dollar at NT$32.864.

The Thai baht was little changed onshore at 33.82 per dollar. The Bank of Thailand said steps taken last week to contain baht gains have stabilised the currency and helped it retreat from close to the highest level in a decade.

Thailand's government last week endorsed central bank measures that included scrapping a 15-day deadline for exporters to convert foreign-exchange earnings into baht, allowing domestic foreign-currency bank accounts, and making it easier for funds and companies to invest abroad.

``The baht is stable now,'' Suchada Kirakul, a central bank assistant governor told reporters in Bangkok. ``That's partly because of our recent measures.'' Bloomsberg

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