Asian Currencies Climb for a Third Week as Improving Economies Draw Funds
Asian currencies strengthened for a third week, led by South Korea’s won and Malaysia’s ringgit, as signs the U.S. recovery is losing traction spurred demand for assets in the faster-growing economies of the world.
The Bloomberg-JPMorgan Asia Dollar Index rose to a 12-week high after U.S. reports this week showed slides in factory orders and home sales. Thailand’s government forecast the fastest economic growth since 1995, Indonesia reported the biggest increase in gross domestic product in almost two years and Korean exports climbed for a ninth month.
“Sentiment on the U.S. is turning bearish and if you are a long-term investor looking for where to put your capital, it’s most likely this part of the world,” said Charles Han, Hong Kong-based head of foreign-exchange trading at Newedge Financial HK Ltd. “That’s supportive for Asian currencies.”
South Korea’s won appreciated 1.8 percent to 1,161.90 per dollar in Seoul, touching an 11-week high of 1,161.78 yesterday, according to data compiled by Bloomberg. Malaysia’s ringgit rose 1.3 percent to 3.1495 in Kuala Lumpur, having reached a two-year high of 3.1415.
The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, advanced 0.6 percent and the MSCI Asia Pacific Index of shares climbed 2.3 percent. Overseas investors bought $864 million more Taiwan shares than they sold this week, lifting net purchases for 2010 to almost $2.8 billion, exchange data show. India had net inflows in the first four days of the week, taking the year’s tally to $11 billion.
‘Quite Impressive’
The Thai baht had its best weekly performance against the dollar in five months after Finance Minister Korn Chatikavanij said on Aug. 4 that Southeast Asia’s biggest economy may expand as much as 8 percent in 2010, more than a June estimate of a maximum 6 percent.
Thailand’s central bank also indicated policy makers may add to the first increase in borrowing costs in almost two years, boosting the attraction of holding baht. “The economy has recovered well, so there is no need to use low interest rates,” Governor Tarisa Watanagase said this week.
The baht rose 0.7 percent in the five days to 32.06 per dollar and touched 32.03, a level not seen since May 2008.
Thailand’s “growth forecast was quite impressive, and there is more room for stocks to rise,” said Paisarn Lertkowit, a currency trader at Bangkok Bank Pcl, the country’s biggest lender. “When you compare this with other regions, only Asia has a pretty impressive growth outlook.”
‘Attractive Investment’
There’s also the prospect of higher interest rates in South Korea, where the central bank is scheduled to review borrowing costs on Aug. 12. Six of 11 economists surveyed by Bloomberg predict the seven-day repurchase rate will be raised by a quarter of a percentage point to 2.5 percent, following a similar-sized increase from a record low in July.
The nation’s finance ministry on Aug. 5 estimated July’s current-account surplus was about $4 billion, which would be the second-highest amount this year. June’s total was $5.04 billion.
“There’s been a lot of recent data that shows the won is an attractive investment,” said Sung Jae Man, a currency analyst at Tong Yang Securities Inc. in Seoul. He said the central bank was suspected of intervening to limit appreciation in the won, which is Asia’s top performer of the past month with a 5.1 percent gain.
The ringgit had its largest weekly advance in almost three months after the government on Aug. 5 indicated it will tolerate currency appreciation as the economy improves. Trade Minister Mustapa Mohamed said the ringgit has been moving “in line” with economic fundamentals, with growth set to accelerate to 6 percent in 2010. Gross domestic product fell 1.7 percent in 2009.
“The brighter prospects in Asia are in contrast to the recent weakness in U.S. indicators,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Investment Bank Bhd. in Kuala Lumpur.
Elsewhere, the Philippine peso rose 1.5 percent in the week to 44.865 versus the dollar, Taiwan’s dollar advanced 0.7 percent to NT$31.819 and India’s rupee appreciated 0.5 percent to 46.165. Indonesia’s rupiah gained 0.1 percent to 8,940.
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net
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