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Asian Currencies Strengthen This Week, Led by Won, as Data Beat Forecasts
South Korea’s won paced a rally in Asian currencies this week after economic data in Asia beat analysts’ estimates, boosting optimism global funds will increase holdings of regional assets.
Korea’s currency had its best week in almost two months as the International Monetary Fund raised its growth forecast for Asia’s fourth-largest economy and said the won was “undervalued.” The ringgit rose to a 13-year high as the central bank kept borrowing costs on hold to support growth and said domestic consumption as well as investment continue to expand.
“These upside surprises are going to shore up market sentiment,” said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. “The ringgit and other currencies are also breaking new levels lately, it shows investor optimism in the region.”
The won strengthened 1.8 percent this week to 1,175.10 per dollar as of 3 p.m. in Seoul, according to data compiled by Bloomberg. The Philippine peso climbed 1.1 percent to 44.705, the ringgit appreciated 1 percent to 3.1203 and the baht advanced 0.5 percent to 31.17.
The Bloomberg-JPMorgan Asia Dollar Index has gained 0.3 percent since Aug. 27. The MSCI Asia-Pacific Index of regional equities increased 2.6 percent during the week to the highest level since Aug. 19. Global investors have plowed more than $22 billion this year into India, South Korea, Indonesia and Thailand, according to exchange data.
‘Outlook Positive’
“Given the outlook of outperformance of economic growth and positive inflows into the region, Asian currencies will extend gains,” said Dariusz Kowalczyk, a Hong Kong-based senior economist at Credit Agricole CIB.
South Korea’s gross domestic product grew 1.4 percent in the three months through June from the first quarter, compared with a July estimate of 1.5 percent, the Bank of Korea said today. The International Monetary Fund on Sept. 1 increased its forecast for the nation’s 2010 gross domestic product to 6.1 percent from a July estimate of 5.75 percent. The won remains “undervalued” and the central bank can still raise interest rates, it said.
The Bank of Korea will increase its benchmark interest rate by 25 basis points to 2.5 percent at its Sept. 9 meeting, according to seven out of 12 economists in a Bloomberg News survey. Five forecast no change.
“The Korean data is very good, and the outlook is very positive,” said Ko Yun Jin, a currency dealer at Kookmin Bank in Seoul.
Baht’s Rally
The ringgit reached 3.1193 per dollar today, the strongest level since October 1997. Malaysia’s central bank yesterday left borrowing costs unchanged at 2.75 percent, and trade ministry data showed overseas shipments climbed 13.5 percent from a year earlier, versus 17.2 percent in June. Economists had predicted an 11.5 percent increase in a Bloomberg News survey.
The baht had a fifth consecutive weekly gain. The central bank last week boosted its one-day bond repurchase rate by a quarter percentage point to 1.75 percent and Assistant Governor Paiboon Kittisrikangwan said after the decision the policy rate remains “very low.”
“The outlook for further rate increases gives a little more upside for the baht,” Credit Agricole’sKowalczyk said. “The pace of gains may slow as the central bank should be more cautious on the impact on exports from the rising baht.”
The rupiah advanced 0.4 percent this week to 9,004 per dollar as Indonesia’s central bank increased banks’ primary- reserve requirements after inflation climbed to a 16-month high in August. Bank Indonesia kept its policy rate unchanged at 6.5 percent after a review.
Elsewhere, the Chinese yuan fell 0.06 percent to 6.8020 from a week ago. The Singapore dollar advanced 0.5 percent this week to S$1.3470.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net
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