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October 27, 2007

Singapore Dollar, Ringgit Reach Decade Highs

The Singapore dollar rose to a 10- year high against the U.S. dollar on speculation traders were testing the upper limit of the band in which the central bank allows the currency to trade.

The local dollar led gains among its Asian counterparts as the Monetary Authority of Singapore said this month it will seek a stronger currency to control inflation. Six of the 10 most- actively traded currencies in Asia outside Japan rose yesterday.

``The market's been trying to find out where the new ceiling is,'' said Nizam Idris, a foreign-exchange strategist at UBS AG in Singapore. ``It's more of the same, pressure on the Singapore dollar to appreciate.''

The Singapore dollar strengthened to S$1.4523, the highest since July 1997, before trading at S$1.4557 late in Singapore yesterday. It may advance to S$1.44 by year-end, Nizam forecast.

The Singapore dollar also logged a seventh weekly gain, its longest winning streak since January 2006.

Malaysia's ringgit climbed to the strongest in almost a decade on speculation the Federal Reserve will lower interest rates this month to arrest a slump in the U.S. housing market, spurring investors to buy emerging-market assets in Asia.

The ringgit also posted a seventh weekly gain, the longest run since May, as stocks in Asia rose. The Morgan Stanley Capital International Asia-Pacific Index of regional shares gained 1.8 percent.

The ``U.S. rate-cut prospect is driving the momentum in Asia,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``The laggards like the ringgit, or even the yuan, will catch up.''

The ringgit gained 0.3 percent to 3.3465 per U.S. dollar, rising 0.4 percent this week, according to data compiled by Bloomberg.

Fed futures traded on the Chicago Board of Trade show an 86 percent chance policy makers will lower the target rate for overnight lending between banks to 4.5 percent on Oct. 31, and 14 percent odds of a cut to 4.25 percent.

The South Korean won gained for a second week to touch the highest in a decade after a report yesterday showed the economy grew at the fastest pace in almost two years and as the U.S. dollar weakened.

The Bank of Korea said the economy expanded 5.2 percent in the third quarter from a year earlier, adding to speculation the central bank may raise rates from a six-year high of 5 percent.

Korea's economic ``improvement should not come as a surprise,'' Philip Wee, senior currency economist at DBS Bank Ltd. in Singapore, wrote in a note to clients. The dollar continues to experience ``heavy selling pressures.''

The won closed at 909.90 yesterday, according to Seoul Money Brokerage Services Ltd. That's the highest since September 1997.

The Vietnamese dong was at 16,083.5 against the dollar in Hanoi, according to prices compiled by Bloomberg.

Elsewhere, the Indonesian rupiah gained 0.3 percent to 9,125 per dollar and the Taiwanese dollar added 0.1 percent to NT$32.465. The Thai baht advanced 0.1 percent to 34.11 onshore.

Courtesy Bloomberg

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