Taiwan Dollar Leads Asia Currencies to 2008 Highs as Region Leads Recovery

Asian currencies rose, with Taiwan’s dollar and South Korea’s won reaching the highest levels in at least 19 months, on speculation investors will plow more funds into local assets as the region leads a recovery.

The Bloomberg-JPMorgan Asia Dollar Index touched a 20-month high and stocks rallied as Greece moved a step closer to securing an aid package from the International Monetary Fund to finance its deficit. Reports this week may show Singapore’s industrial production grew in March and South Korea’s economy expanded in the first quarter. Asia will need to tighten monetary policy earlier because it is recovering faster than other parts of the world, the IMF said last week.

“Funds are coming into this region on expectations higher rates will soon follow those growth signs,” said Zaki Mokhtar, head of foreign-exchange spot trading at RHB Bank Bhd. in Kuala Lumpur. “The euro’s rebound is giving some support” to risk- taking, he said.

Taiwan’s currency strengthened 0.3 percent to NT$31.359 versus its U.S. counterpart as of the 4 p.m. close local time, according to Taipei Forex Inc. It reached NT$31.288, the highest level since August 2008. The won rose 0.5 percent to 1,103.80 and touched 1,102.85, the strongest since September 2008.

Photographer: Maurice Tsai/Bloomberg

Taiwan currency is arranged for a photograph in Taipei, on Feb. 21, 2008. Close

Taiwan currency is arranged for a photograph in Taipei, on Feb. 21, 2008.

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Photographer: Maurice Tsai/Bloomberg

Taiwan currency is arranged for a photograph in Taipei, on Feb. 21, 2008.

The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, reached 113.29 today, the highest level since August 2008. The MSCI Asia-Pacific index of regional shares rose 1.6 percent, halting two days of losses.

Capital Inflows

Greece Finance Minister George Papaconstantinou said yesterday in Washington that money will be available “rather soon” and his country wouldn’t restructure its debt as 8.5 billion euros ($11.3 billion) of the country’s bonds mature on May 19. The single European currency dropped 0.2 percent to $1.3357 after rallying the most in two weeks on April 23.

Malaysia’s ringgit strengthened to a two-year high, the Indonesian rupiah reached levels last touched in July 2007, and the Philippine peso climbed to the highest since August 2008.

“All Asian currencies, including the rupiah, have appreciated today on capital inflows,” said Ho Woei Chen, a regional economist at United Overseas Bank Ltd. in Singapore. “Greece’s decision has helped to stabilize risk appetite as it wouldn’t be good for anyone if Europe gets into big trouble.”

Korea GDP

The won appreciated as global funds pumped more money into Korean shares to profit from accelerating economic growth and increasing exports. Reports this week are forecast to show gross domestic product rose at a faster pace in the first quarter and overseas sales climbed for a sixth month in April.

“Data this week are expected to be very strong,” said Peter Redward, head of rates research at Barclays Plc. “Combine that with strong risk appetite and very good demand for Korean assets, which is reinforcing the won.”

Korea’s economy probably expanded 7.5 percent from a year earlier in the three months through March, the most since 2002, according to the median estimate of economists surveyed by Bloomberg before the central bank report tomorrow. Exports increased 32 percent in April, based on a separate survey before government trade data is published on May 1.

Taiwan’s dollar gained the most in more than a week on speculation a trade accord with China will boost foreign investment as the recovery gathers pace.

Taiwan Trade Accord

Public support for a planned Economic Cooperation Framework Agreement, or ECFA, with the mainland increased seven percentage points to 48 percent after Taiwan President Ma Ying-jeou held a televised debate on the pact with the opposition leader yesterday, the China Times reported.

The island’s currency advanced 2.2 percent so far this year as overseas funds bought $4.1 billion more Taiwan stocks than they sold.

“It’s helpful to make people in Taiwan realize that the ECFA will create a new market,” said Henry Lin, a currency trader at Taiwan Shin Kong Commercial Bank. “Foreign banks with investment capital will buy the Taiwan dollar. I think the International Monetary Fund will show its hand to solve the Greece problem.”

Elsewhere in the region, the Philippine peso climbed 0.3 percent to 44.21 per dollar and Singapore’s currency appreciated 0.3 percent to S$1.3680. The Indonesian rupiah rose 0.1 percent to 9,008 and the Thai baht was little changed at 32.22. China’s yuan was at 6.8271, compared with 6.8275 at the end of last week.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

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