Asian Currencies Near Two-Week High on Fed Stimulus Speculation

Asian currencies traded near the highest level in almost two weeks on speculation the Federal Reserve will announce fresh stimulus measures to shore up growth in the world’s largest economy.

The Federal Open Market Committee will begin a two-day policy meeting today after data in the past week showed U.S. retail sales fell for a second month in May and consumer prices dropped the most in three years. China’s yuan and Taiwan’s dollar were little changed before leaders from the Group of 20 nations finish a two-day meeting in Mexico to address Europe’s debt crisis and the global economic slowdown.

“Any signs that the Fed is trying to provide a bit of stimulus will be much-wanted relief,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd.

The Singapore dollar rose 0.2 percent to S$1.2689 per dollar as of 4:31 p.m. local time, according to data compiled by Bloomberg. Thailand’s baht appreciated 0.2 percent to 31.42 and South Korea’s won advanced 0.1 percent to 1,156.45.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, gained 0.1 percent to 114.69. The gauge touched 114.89 yesterday, the highest level since June 7.

The baht approached the strongest level in almost a month on speculation exporters are converting overseas profits. A government report this week may show overseas sales increased 0.65 percent in May from a year earlier after a decline of 3.67 percent the previous month, according to the median forecast of economists in a Bloomberg News survey.

Spanish Borrowing Costs

“The baht seems to be getting some support from companies repatriating overseas profits,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Sentiment itself remains fragile as Europe’s debt problems still persist.”

The won climbed for a fifth day as foreign investors bought more of the nation’s shares than they sold for a second day.

“Overseas funds selling the dollar to buy Korean stocks supported the won, and also there was expectation for further monetary stimulus by the Fed,” said Lee Jung Hyun, a Seoul- based currency trader at Industrial Bank of Korea.

Indonesia’s rupiah dropped the most in more than a week after Spain’s borrowing costs rose, adding to concern Europe’s debt crisis will worsen and damp appetite for emerging-market assets. The currency weakened 1 percent to 9,478 per dollar, the biggest drop since June 7, according to prices from local banks compiled by Bloomberg.

Spanish Yields Jump

Spain’s 10-year yields surged to a euro-era record after a report showed bad loans jumped in April to the highest since 1994. Greek politicians are beginning a second day of talks to form a coalition government that can implement austerity measures tied to a 240 billion euro ($302 billion) bailout.

“The concern has moved from Greece to larger economies like Spain and Italy, which weighs on the rupiah,” said Nurul Eti Nurbaeti, the head of treasury research at PT Bank Negara Indonesia in Jakarta. “We see strong dollar demand constantly as even domestic investors and corporates prefer the dollar over the rupiah to avoid currency risk during uncertain times.”

Elsewhere, India’s rupee dropped 0.3 percent to 56.0850. The Philippine peso weakened 0.1 percent to 42.292, while Vietnam’s dong strengthened 0.1 percent to 20,945.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net.

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

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