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Asian Currencies Gain on Global Recovery Signs; Rupee Climbs on Rate Rise
Asian currencies rose, led by the South Korean won and the Indian rupee, on signs the global economic recovery remains intact and investment flows into the region are increasing.
The Bloomberg-JPMorgan Asia Dollar Index climbed after consumer confidence in South Korea this month stayed at the highest level since January and Indonesia’s government forecast economic growth will pick up in the second half of the year. India’s rupee climbed the most in five weeks as the central bank raised a benchmark interest rate more than economists forecast.
“The overall sentiment has again shifted to taking on more risk,” said Joey Cuyegkeng, an economist in Manila at ING Groep NV, the Netherland’s largest financial services company. “Concern over a significant slowdown in global growth was overdone.”
The won strengthened 0.8 percent to close at 1,181.43 per dollar in Seoul, according to data compiled by Bloomberg. India’s rupee appreciated 0.7 percent to 46.73 per dollar as of 2:35 p.m. in Mumbai, while the Philippine peso gained 0.3 percent to 45.97.
The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, and the MSCI Asia Pacific Index of shares both rose to one-month highs. Overseas investors have this month pumped about $6 billion into stocks in India, South Korea and Taiwan, exchange data show.
Intervention Risk
The won reached a one-month high after the Bank of Korea said that this month’s Consumer Confidence Index was at 112, unchanged from June and the highest level since January. A number exceeding 100 indicates optimists outnumber pessimists. Foreigners bought more South Korean shares than they sold for a fifth day, according to stock-exchange data.
“Demand for higher-yielding currencies is strengthening,” said Ha Jun Woo, a foreign-exchange trader at Daegu Bank in Seoul. “Still, intervention fears are pressuring the won, and it looks like the authorities will try to limit appreciation.”
South Korea’s economy expanded 1.5 percent in the second quarter from the previous three months, faster than the 1.3 percent growth forecast in a Bloomberg survey of economists, data yesterday showed. Strengthening demand prompted the central bank to lift its benchmark interest rate this month to 2.25 percent, from a record-low 2 percent, to keep inflation in check.
Rate Decision
India’s rupee advanced after the central bank boosted the reverse repurchase rate by 0.5 percentage point to 4.5 percent, more than the 0.25 point increase forecast by all 20 economists in a Bloomberg News survey.
The nation’s wholesale-price inflation rate has stayed above 10 percent since February, and the opposition plans to raise the issue in parliament. “Policy actions become a necessity” to anchor inflation expectations, the central bank said in a statement yesterday.
“Inflation has become the dominant political and economic issue in India,” said Jay Shankar, chief economist at Religare Capital Markets Ltd. in Mumbai. “The RBI needs to continue to be aggressive with rate hikes to slow inflation.”
Indonesia’s rupiah strengthened for a fourth day, its longest winning streak in more than a month. Southeast Asia’s biggest economy likely grew 5.8 percent in the six months ended June and may expand 6 percent in the second half, the Finance Ministry said in a statement yesterday. The government also forecast its budget deficit will narrow to 1.5 percent of gross domestic product this year from 1.6 percent in 2009.
“Investor appetite for Indonesian assets is increasing as sentiment is positive” on the domestic economy, said Muhammad Fauzi Halim, a foreign-exchange trader at PT Bank Resona Perdania in Jakarta.
The Jakarta Composite Index of shares has climbed almost 20 percent so far this year as overseas investors pumped $1.2 billion into the nation’s stocks as of yesterday. The rupiah appreciated 0.2 percent to 9,014 per dollar.
Aquino’s Address
Malaysia’s ringgit gained as the FTSE Bursa Malaysia KLCI advanced to a two-year high. Foreign direct investment in the first three months of the year totaled 5.06 billion ringgit ($1.6 billion), compared with 5.66 billion in the whole of 2009, Minister of International Trade and Industry Mustapa Mohamed said late yesterday.
“Malaysia’s growth story is well recognized, and the broader ringgit sentiment continues to move along those lines,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore.
The currency advanced 0.4 percent to 3.1865 per dollar.
Philippine Deficit
The peso rose to a one-month high after President Benigno Aquino said in his State of the Nation address yesterday he would tap private investors to build infrastructure, easing concern that the nation’s budget deficit will widen further.
The deficit in the first six months of the year was 196.7 billion pesos ($4.3 billion), exceeding the previous government’s estimate for a gap of 178.5 billion pesos.
“People remain optimistic that the Aquino administration will be able to resolve some of the fiscal problems it has inherited,” said Cuyegkeng at ING.
Elsewhere, Singapore’s dollar rose 0.2 percent to S$1.3619, Taiwan’s dollar advanced 0.1 percent to NT$32.090 and the Thai baht appreciated 0.1 percent to 32.19.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Patricia Lui at plui4@bloomberg.net.
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