Won, Australian Dollar Strengthen on G-20 Deficit Targets
U.S. President Barack Obama speaks at a news conference during the Group of 20 summit in Toronto, on June 27, 2010. Photographer: Norm Betts/Bloomberg
June 28 (Bloomberg) -- Robert Rennie, head of currency research at Westpac Banking Corp., talks with Bloomberg's Linzie Janis from Sydney about the outlook for China's economy. A Chinese government official said the nation’s pledge for a more flexible yuan will slow China's exports this year, adding to difficulties that include the European debt crisis and rising costs. Rennie also discusses the U.S. economy and global currency market. (Source: Bloomberg)
June 25 (Bloomberg) -- Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management, talks with Bloomberg's Haslinda Amin about his forecast for the Australian dollar. Ferguson, speaking from Melbourne, also discusses the implications of Julia Gillard's appointment as Australia's prime minister on the nation's currency and proposed mining profits tax, and the outlook for the yuan. (Source: Bloomberg)
The won, ringgit and Australian dollar strengthened against the U.S. currency and the yen, and concerns about defaults diminished after leaders from the Group of 20 nations endorsed targets to slash budget deficits once the world’s economic recoveries are cemented.
The won gained 1.3 percent to 1,201.89 per dollar at 3:27 p.m. in Tokyo, rising for the first time in five days, and Malaysia’s ringgit climbed 0.7 percent. Australia’s currency rose 0.4 percent. The cost of protecting Asia-Pacific corporate and government bonds from non-payment fell the most since June 21. The MSCI Asia Pacific Index swung between gains and losses. Futures on the Standard & Poor’s 500 Index lost 0.1 percent and those for the Euro Stoxx 50 added 0.4 percent.
The G-20 pledged to maintain existing stimulus plans and take “concerted actions” to sustain the global recovery, then aim to reduce deficits by 2013. G20 leaders also said the recovery, while faster than expected, is “uneven and fragile” and called for banks to raise more capital to avoid a repeat of the global financial crisis.
“Investors seem to be weighing uncertainties over the global economic outlook in the latter half,” said Hyun Dong Sik, a fund manager at Korea Investment Trust Management Co. in Seoul, which manages $15 billion. “I don’t think we will have a double dip, but the pace of recovery seen in the past year will inevitably slow down as stimulus measures fizzle out.”
Yen Action
The yen was at 89.36 per dollar from 89.23 last week, when it strengthened to 89.22, the highest since May 21, while the dollar slipped to 1.0928 Swiss francs from 1.0929, after earlier weakening to 1.0897, the lowest since May 4.
Yuan forwards strengthened 0.1 percent to 6.67 per dollar, extending last week’s again, after U.S. President Barack Obama said that his government expects the yuan to go up “significantly.” The president also said the G20’s goal to cut deficits reflects U.S. targets and takes into account the fiscal and economic needs of each nation.
“The G-20 statement has Europe’s desire for deficit cuts and the U.S.’s for maintenance of economic stimulus, which satisfies both of them,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo.
Credit-default swap indexes declined, with the Markit iTraxx Australia index sliding 9 basis points to 126, according to Nomura Holdings Inc. The Markit iTraxx Japan index dropped 6 basis points to 130, Morgan Stanley and CMA prices show, while the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 6 basis points to 133 basis points, according to Royal Bank of Scotland Group Plc prices.
Equity Movers
About the same number of stocks rose and fell on the MSCI regional index. Mizuho Financial Group Inc. led Japanese banks lower, losing 2.6 percent after saying it plans to sell new shares. Seoul Broadcasting System, which has the World Cup broadcasting rights in South Korea, dropped 1.4 percent after the nation’s soccer team failed to advance to the quarterfinals.
Indian Oil Corp., the nation’s biggest state-owned refiner, soared 6.4 percent, adding to an 11 percent surge on June 25 after India said it will scrap price controls on gasoline and diesel after more than seven years. Bharat Petroleum Corp. gained 3.2 percent and Hindustan Petroleum Corp. surged 7.1 percent. The Sensex climbed 0.5 percent, the first increase in three days.
Raw material prices also increased, with nickel advancing as much as 1.8 percent and copper trading near the highest level in four weeks. Oil pared gains to trade little changed at $78.77 a barrel in New York after earlier rising to the highest in seven weeks.
To contact the reporters for this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net.
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