By Lee Chyen Yee
TAIPEI, Dec 18 (Reuters) - The Philippine peso and the Korean won rose to multi-week highs on Thursday, against a U.S. dollar that has slumped broadly after the U.S. Fed cut rates to near zero and signalled willingness to flood markets with cash.
The peso firmed to a 2-1/2-month high and the Korean won was at a 6-week peak, both hitherto among the worst performers in emerging Asia this year together with the Indonesian rupiah.
"With interest rates near to zero, there is no reason to hold U.S. dollars. The U.S. currency is worthless now," said a trader in Singapore. "Asian currencies should continue to recover."
After the Federal Reserve slashed rates on Tuesday, U.S. rates are now among the lowest in the world. That has pushed the U.S. dollar down to a 2-1/2-month low against the euro and to near 13-year lows against the Japanese yen.
"History teaches that Asia does well with a weak dollar because central banks intervene to resist currency appreciation and incomplete sterilization of the intervention proceeds liquefies money markets," ING economist Tim Condon said in a note.
Other analysts also concur with that view, that Asia's intervention policy will now become more pro-growth because central banks will be buying dollars now and injecting local currency into markets.
The peso hit an intraday high of 46.6 to the U.S. dollar, its strongest level since the end of September, ahead of a central bank policy review announcement. The market expects the central bank to cut interest rates by half a percentage point on Thursday to support the economy.
Standard Chartered said in the report it had raised the peso's short-term forex rating to neutral from overweight considering the country's economic growth will bottom out in the second quarter and then recover.
"The Philippines will be more insulated from the collapse in external demand than several other Asia-ex-Japan economies as exports to GDP is only around 32 percent," it said, adding that the country's current account is set to improve in 2009.
The South Korean won climbed to a six-week high of 1,280.0 after the Federal Reserve's massive rate cut and a Bank of Korean plan to inject $4 billion next week eased concerns about tight liquidity in its money markets.
The won has lost about a third of its value since the start of 2008 as politicial uncertainties weighed on the currency.
The rupiah was quoted at 10,950, hovering at an over one-month high, with the market eyeing possible rate cuts.
"We assume the Bank of Indonesia is always under political pressure to cut interest rates and the pressure is especially intense ahead of the 2009 election," ING said in a report.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0621 GMT
Currency Latest bid Previous day Pct Move
Japan yen 87.98 87.31 -0.76
Sing dlr 1.4344 1.4334 -0.07
Taiwan dlr 32.440 32.720 +0.86
Korean won 1285.40 1325.00 +3.08
Baht 34.40 34.54 +0.41
Peso 46.60 46.90 +0.64
Rupiah 10950.00 10950.00 +0.00
Rupee 47.31 47.65 +0.72
Ringgit 3.4780 3.5280 +1.44
Yuan 6.8318 6.8357 +0.06
Change so far in 2008
Currency Latest bid End prev year Pct Move
Japan yen 87.98 111.33 +26.54
Sing dlr 1.4344 1.4382 +0.26
Taiwan dlr 32.440 32.443 +0.01
Korean won 1285.40 935.70 -27.21
Baht 34.40 33.68 -2.09
Peso 46.60 41.28 -11.42
Rupiah 10950.00 9390.00 -14.25
Rupee 47.31 39.41 -16.69
Ringgit 3.4780 3.3050 -4.97
Yuan 6.8318 7.3041 +6.91 (Reporting by Lee Chyen Yee; Editing by Kazunori Takada)