Asian Currencies Gain as Europe Acts to Stem Crisis Over Sovereign Debt

Asian currencies completed their first weekly advance in a month, led by Malaysia’s ringgit, as optimism European officials will contain the region’s debt crisis helped revive demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.5 percent this week as the European Central Bank outlined plans to pump cash into the debt-ridden economy. The ringgit and Taiwan’s dollar gained as reports yesterday showed export growth accelerated. Global funds bought a combined $403 million more of South Korean, Taiwanese and Thai shares than they sold on Oct. 6, exchange data show.

“Markets appear to have taken it positively that the ECB provided extraordinary liquidity measures at its policy meeting,” said Nick Verdi, a Singapore-based currency strategist at Barclays Capital. “We have very positive fundamental views on a number of Asian currencies. Given the risks emanating from Europe which will persist in the near term, the volatility isn’t likely to fall.”

The ringgit gained 1.1 percent this week to 3.1608 per dollar yesterday in Kuala Lumpur, snapping four weeks of declines, according to data compiled by Bloomberg. The Philippine peso gained 0.4 percent to 43.545 and South Korea’s won jumped 1.1 percent yesterday to 1,178.40 and was little changed from last week.

Malaysian exports climbed 10.9 percent in August from a year earlier, the most in four months, according to a trade ministry statement yesterday. Shipments from Taiwan rose 9.9 percent in September, the Ministry of Finance said yesterday. That compared with a gain of 7.2 percent in the prior month and the median estimate of 9.6 percent in a Bloomberg survey.

Unlimited Loans

The MSCI Asia-Pacific Index of shares advanced for a second day after ECB President Jean-Claude Trichet said on Oct. 6 the monetary authority would reintroduce purchases of covered bonds and offer banks additional unlimited loans to support markets. Europe’s policy makers left the benchmark interest rate unchanged at 1.5 percent.

Employers in the U.S. added more workers in September than forecast, according to a Labor Department report yesterday. Payrolls rose by 103,000 after a 57,000 gain in August. The median forecast of economists surveyed by Bloomberg was for an increase of 60,000. The jobless rate in the U.S. was 9.1 percent.

“The ECB’s plan to boost liquidity allayed concern in the market,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul.

The baht strengthened 0.5 percent yesterday and 0.5 percent this week to 30.94 per dollar in Bangkok, according to data compiled by Bloomberg. Taiwan’s dollar increased 0.4 percent to NT$30.49 and was little changed from last week.

Stockpile Shrank

Data this week showed currency reserves in Taiwan fell by a record $11.2 billion last month, while Korea’s stockpile shrank by the most in three years, indicating central banks sold dollars to support local currencies. Indonesian holdings dropped $10 billion last month from a record $124.6 billion in August, the bank reported on Oct. 6.

Taiwan’s dollar had its worst month in September since 1997, prompting central bank Governor Perng Fai-nan to say on Oct. 5 policy makers don’t favor a weaker currency.

Bank Indonesia will continue to purchase government debt to stabilize the rupiah, Hendar, the central bank’s director of monetary policy who uses only one name, said in a mobile-phone text message on Oct. 3. Thailand’s central bank also said this week it entered the market to curb volatility. Policy makers intervene by buying or selling currencies to try and influence exchange rates.

“Some Asian central banks, not just Thailand, seem to have been intervening and that should also support currencies in the region,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok.

India’s rupee gained 0.4 percent yesterday to 49.1550 per dollar, paring its drop for the week to 0.4 percent. Indonesia’s rupiah declined 0.1 percent yesterday and 1.2 percent this week to 8,900, according to prices from local banks compiled by Bloomberg. Markets in China are shut this week for the National Day holidays.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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