Asian Currencies Gain on Global Stimulus Bet; Peso Leads Rally

Asian currencies rose for a second week on speculation leaders of the Group of 20 nations will announce measures to combat a global economic slump when they meet next week for talks in Mexico.

The Bloomberg-JPMorgan Asia Dollar Index climbed 0.3 percent after Bank of England Governor Mervyn King said June 14 that the case for more stimulus in the U.K. “is growing” as Europe’s debt crisis worsens. U.S. data showed consumer prices dropped in May by the most in three years, giving the Federal Reserve room for more monetary stimulus before a policy meeting next week. The Philippine peso led gains as the government sought improved credit ratings and exports rose more than economists forecast.

“Global policy makers are more proactive and the market is hoping for some kind of bazooka from the Federal Reserve or the G-20 summit next week,” said Roy Teo, a currency strategist in Singapore at ABN Amro Private Bank. “That could stimulate economic confidence and activities.”

The peso strengthened 2.4 percent this week to 42.255 per dollar in Manila, according to data compiled by Bloomberg. South Korea’s won climbed 0.8 percent to 1,165.75, Thailand’s baht rose 0.7 percent to 31.47 and Malaysia’s ringgit advanced 0.7 percent to 3.1630.

The MSCI Asia-Pacific Index of stocks rose 2.4 percent this week, the most since January. The Fed holds its open-market committee meeting on June 19-20, while G-20 leaders gather for a summit on June 18-19. Spain’s credit rating was cut three levels by Moody’s Investors Service this week after the nation sought a 100 billion euros ($126 billion) bailout for its banks. Greece will hold a June 17 election that may determine whether it stays in the euro.

Fund Inflows

“If Europe’s crisis worsens, that will adversely impact other nations and central banks in the developed nations will take action to support their economies,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo.

The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, has rebounded 0.8 percent from 113.68 on June 1, the lowest level since September 2010.

Emerging-market stock funds had $920 million of inflows in the past week, while bond funds attracted $361 million, according to reports published by Citigroup Inc. and Morgan Stanley that cited data from EPFR Global.

Peso Rally

The peso rallied after Finance Secretary Cesar Purisima asked rating companies on June 13 to upgrade the nation’s junk- grade status. Standard Chartered Plc said June 14 it expects the Philippines to have an investment-grade rating by 2014. Government reports this week showed exports rose 7.6 percent in April from a year earlier, after shrinking 0.8 percent in March while remittances climbed 5.3 percent in April.

“There’s a lot of hope on the upgrade,” said Andy Ji, a strategist in Singapore at Commonwealth Bank of Australia. (CBA) “The fiscal situation is good and the macro outlook is positive. Remittances have always been strong.”

Central banks in the Philippines, South Korea, Thailand and Indonesia kept their benchmark interest rates on hold this month, while China on June 8 lowered its borrowing costs for the first time in four years. Exports from Asia’s largest economy increased 15.3 percent in May from a year earlier, exceeding all 29 estimates in a Bloomberg survey, data showed June 10.

Yuan Fixing

The yuan appreciated 0.08 percent from a week ago to 6.3651 per dollar. The central bank fixed its reference rate yesterday at 6.3089, 0.97 percent stronger than the June 14 closing level. The currency is allowed to fluctuate as much as 1 percent from the fixing and the stronger reference rate may deflect criticism of the nation’s exchange rate at the G-20 talks.

“The fixing is China’s pre-emptive move to ease any pressure on appreciation at the G-20 meetings,” said Stella Lee, president of Success Futures & Foreign Exchange Ltd. in Hong Kong.

The U.S. contends that China is keeping the yuan artificially weak to boost exports and calls for appreciation are heating up as President Barack Obama prepares for a November election. Germany will call attention to a number of issues including China’s exchange rate at the G-20 talks, two German government officials said in Berlin on June 12.

Elsewhere among Asian currencies, Taiwan’s dollar advanced 0.2 percent to NT$29.931 versus the greenback. India’s rupee fell 0.1 percent to 55.4975, while Indonesia’s rupiah gained 0.9 percent to 9,385. Vietnam’s dong advanced 0.2 percent to 20,958.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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