Asian Currencies Reach Four-Month High Before Fed, German Ruling
Central banks in South Korea, the Philippines and Indonesia are due to set interest rates this week as the euro-area financial crisis damps demand for regional goods. The Fed will probably keep borrowing costs near zero, according to a Bloomberg survey, and decide whether additional bond purchases are warranted to support the economy. The MSCI Asia Pacific Index of shares dropped for the first time in four days ahead of tomorrow’s ruling by Germany’s Federal Constitutional Court on the country’s participation in a European bailout fund.
“Germany’s ruling is an uncertain factor surrounding Europe’s debt crisis for now, limiting risk appetite for investors,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “But sentiment is not so weak and Asia is still seeing some fund inflows, providing a floor for regional currencies. Investors are also waiting for the results of the Fed’s meeting.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most-active currencies, advanced 0.2 percent to 116.03 and touched 116.05, the highest level since May 14. Malaysia’s ringgit climbed 0.4 percent to 3.0892 against the greenback as of 5:15 p.m. in Kuala Lumpur and India’s rupee appreciated 0.1 percent to 55.3650, according to data compiled by Bloomberg. South Korea’s won gained 0.1 percent to 1,128.15 and Taiwan’s dollar rose 0.1 percent to NT$29.715.
Yuan forwards halted a two-day advance after the central bank weakened the daily fixing for the first time in four days. The currency needs to depreciate a little to ease pressure on exports, the China Securities Journal reported in a front-page commentary published today. Overseas shipments must grow more than 10 percent each month for the rest of 2012 to achieve a full-year 10 percent growth target, it said.
The People’s Bank of China fixed the reference rate 0.03 percent lower at 6.3391 per dollar. Twelve-month non-deliverable forwards traded at 6.4215 in Hong Kong, the same rate as yesterday, data compiled by Bloomberg show. The contracts were at a 1.4 percent discount to the spot rate of 6.3351 in Shanghai.
“What the authorities are doing now is to make the yuan more flexible,” said Eddie Cheung, a foreign-exchange analyst at Standard Chartered Plc in Hong Kong. “Whether we will see exports growing another 10 percent or so, it’s quite a big number” to achieve but a rebound in China’s economy later in the year will help the currency resume appreciation, he said.
China’s exports rose 2.7 percent in August, compared with the 1 percent pace the previous month and a 24.5 percent increase a year earlier, official data showed yesterday.
Macquarie Group Ltd. cut China’s 2012 economic growth estimate to 7.7 percent from an earlier prediction of 8.1 percent, analyst Chen Shao wrote in a research report yesterday, saying inflationary pressures limit room for monetary easing. JPMorgan Chase & Co., Nomura Holdings Inc. and Daiwa Capital Markets also cut their forecasts.
Policy makers in South Korea will probably lower the benchmark seven-day repurchase rate by 25 basis points to 2.75 percent on Sept. 13, according to 15 of 16 economists surveyed by Bloomberg, with one predicting no change. In Indonesia and the Philippines, borrowing costs are expected to stay at 5.75 percent and 3.75 percent, respectively, separate surveys show.
Elsewhere in Asia, Indonesia’s rupiah dropped 0.1 percent to 9,578 per dollar in Jakarta, according to prices from local banks compiled by Bloomberg. Thailand’s baht was little changed at 31.10, while the Philippine peso rose 0.1 percent to 41.570. Vietnam’s dong held at 20,850.
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