China Dismisses Currency Talk; S&P; Lifts Korea

Chinese Premier Zhu Rongji said Monday that the local currency, the yuan or renminbi, would not be devalued, state television said.

Zhu spoke after a report in an official newspaper said devaluing the yuan might not be a bad idea. The report sent markets tumbling in much of Asia Monday.

“The Chinese government will continue to adhere to its policy of not devaluing the renminbi,” television quoted Zhu as telling Laotian Prime Minister Sisavat Keobounphan in Beijing.

Earlier Monday, the Central Bank also dismissed the report in Sunday’s China Daily Business Weekly, saying it was “a private opinion and did not reflect” the Central Bank’s views.

The portion of the article that triggered selling in Asian stock markets Monday was tagged onto the end of a lengthy report on Brazil’s currency crisis.

It read: “As the financial market responded positively after the Brazilian government let its currency float against the U.S. dollar, some analysts said the devaluation or floating of the renminbi would not definitely be a bad thing.”

The Hong Kong stock market slumped 2.5%, Singapore plunged 5.5% and South Korea lost 2%.

But most markets were rebounding early today on news that South Korea’s bond rating was raised one notch, to investment-grade, by Standard & Poor’s Corp., which said the nation is recovering from the economic woes that struck East Asia in mid-1997.

South Korea’s “decisive government responses to the crisis” justified the improvement to a BBB- rating from BB+, a junk category reserved for riskier borrowers, the rating company said.

Fitch IBCA last week was the first big credit rating firm to raise South Korea’s sovereign credit rating to investment grade. A higher rating should allow South Korea to borrow at lower interest rates, and will allow more global investors to buy the country’s bonds.