Asian Currencies Rebound on Bets of More Stimulus to Aid Growth

Asian currencies advanced on speculation policy makers will unveil further stimulus measures to bolster the global economy after reports showed growth slowed in the region and in Europe.

Taiwan’s dollar rebounded from a six-month low and China’s yuan rose from the weakest since September 2011 after new home sales in the U.S. fell 8.4 percent in June from a two-year high. South Korea’s economy grew at the slowest pace in almost three years last quarter, the central bank said. The Philippine peso climbed from this month’s low before a rate decision today, while the Reserve Bank of India next meets on July 31.

“The market is reacting positively to expectations that policy makers are lining up actions to stem growth risks,” said Ashish Agrawal, an Asia ex-Japan rates strategist at Credit Suisse Group AG in Singapore. “Korea and China are expected to continue easing and so will India. Low inflation will likely allow the Philippines to act should the growth outlook deteriorate.”

The won gained 0.4 percent to 1,146.78 per dollar as of 11:13 a.m. in Seoul, according to data compiled by Bloomberg. Taiwan’s dollar climbed 0.2 percent to NT$30.143, the peso strengthened 0.2 percent to 42.085 and Malaysia’s ringgit rose 0.2 percent to 3.1687.

The Bloomberg-JPMorgan Asia Dollar Index (MXAP), which tracks the region’s currencies, rose. Its 60-day historical volatility was little changed at 3.77 percent. The MSCI Asia Pacific Index of stocks gained 0.5 percent, snapping a four-day slide.

‘Increasingly Shaky’

South Korea’s economy expanded 2.4 percent in the three months ended June 30, the slowest pace since the third quarter of 2009. Finance Minister Bahk Jae Wan cited the Europe crisis as a reason, saying additional fiscal stimulus is being held in reserve.

European Central Bank council member Ewald Nowotny said in an interview published yesterday that there are merits in giving the European Stability Mechanism a banking license to help tackle the region’s crisis.

“The ESM talks in Europe yesterday eased risk-averse sentiment,” said Byeon Ji Young, a currency analyst at Woori Futures Co. in Seoul. “The GDP data may limit won gains.”

The peso advanced the most since July 17. The Philippine central bank will hold its overnight overnight rate at 4 percent at today’s meeting, according to 11 of 15 analysts in a survey. Four predicted a cut. Governor Amando Tetangco said on July 24 “there is some scope to adjust monetary policy settings to protect the inflation target on the downside.”

Yuan Fixing

The yuan rose 0.06 percent to 6.3846 per dollar in Shanghai as the People’s Bank of China strengthened its reference rate for the first time in four days, by 0.08 percent to 6.3381. In the U.S., the Federal Open Market Committee meets July 31 and Aug. 1.

“Investors have revived hopes for quantitative easing in the U.S., leading to a firmer yuan today,” said Daniel Chan, executive vice-president at Glory Sky Global Markets Ltd. “Chinese officials are still worried about exports as Europe’s debt crisis continues.”

Elsewhere, Thailand’s baht climbed 0.1 percent to 31.65 per dollar, after hitting 32 on July 23, the weakest levels since August 2010. Indonesia’s rupiah fell 0.1 percent to 9,494, and Vietnam’s dong was little changed at 20,883.

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

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