Asian Currencies Rise as Easing Japan Nuclear Crisis Boosts Risk Appetite

Asian currencies advanced, led by the Philippine peso and South Korea’s won, as optimism the worst of Japan’s nuclear crisis is over boosted investor appetite for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index reached the highest level since March 10 as the MSCI Asia-Pacific Index of stocks rallied for a third day. Japanese Prime Minister Naoto Kan said yesterday that there is “light at the end of the tunnel” in the battle to avert a meltdown at a crippled nuclear power plant following the March 11 earthquake and tsunami.

“The fact that there has been no further worsening in the situation in Japan is helping to boost confidence in global markets and that has helped to push some of the Asian currencies higher,” said Christopher Gothard, head of foreign exchange at Brown Brothers Harriman (Hong Kong) Ltd. “You are seeing more confidence coming into the market and a little more acceptance to take on some risk.”

The peso strengthened 0.5 percent to 43.333 per dollar as of the 4 p.m. close in Manila, according to Tullett Prebon Plc. The won gained 0.3 percent to 1,120.95 and Indonesia’s rupiah rose 0.2 percent to 8,718, according to data compiled by Bloomberg. Malaysia’s ringgit advanced 0.1 percent to 3.0305.

The peso advanced for a third day on speculation the central bank will raise its benchmark interest rate from a record low when it meets on March 24.

Bangko Sentral ng Pilipinas will lift its overnight borrowing rate by a quarter of a percentage point to 4.25 percent, according to 10 of 15 economists surveyed by Bloomberg. One predicts a half percentage point increase, while four forecast no change. Consumer prices rose 4.3 percent in February from a year earlier, the most since May.

‘Rate-Tightening Cycle’

“We expect the central bank to start a cautious rate- tightening cycle later this week,” said Prakriti Sofat, a Singapore-based economist at Barclays Capital. “A stronger currency would help against imported price pressures as well.”

China’s yuan climbed to a 17-year high on speculation policy makers will raise interest rates and allow more currency appreciation to curb inflation. The current cycle of interest rate increases is halfway over, the China Securities Journal said in its editorial today. The pace of yuan gains may accelerate as it will reduce the cost of imports and help curb rising prices, the paper said.

The yuan strengthened 0.08 percent to 6.5561, touching 6.5552 earlier, the strongest level since China unified official and market exchange rates at the end of 1993.

Taming Inflation

The won rallied for a third day on speculation policy makers will tolerate gains to curb inflation, partly caused by rising oil prices. Crude has advanced almost 12 percent this year on political tension in the Middle East and North Africa. It declined 0.1 percent to $102.19 a barrel in New York today, earlier rising by as much as 0.3 percent, as Allied airstrikes on Libya threatened to prolong a supply disruption.

Consumer prices in South Korea climbed 4.5 percent in February from a year earlier, the most since November 2008, official data show. The nation’s biggest economic test is taming inflation as price gains are set to remain elevated in the coming months, central bank Governor Kim Choong Soo said on March 16.

Elsewhere, the Thai baht strengthened 0.2 percent to 30.24 per dollar, according to data compiled by Bloomberg. The Taiwan dollar gained 0.1 percent to NT$29.542 and the Singapore dollar advanced 0.3 percent to S$1.2631. India’s rupee rose 0.1 percent to 44.975.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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