Asian Currencies Reach 4-Month High on China, Fed Stimulus Bets

Asian currencies rose to a four- month high on optimism potential stimulus measures by China and the U.S., among the region’s biggest export markets, will boost inflows to emerging economies.

Malaysia’s ringgit and Taiwan’s dollar reached their strongest levels since May after Chinese Premier Wen Jiabao said yesterday the nation will appropriately use preemptive policy to bolster growth. Global funds bought $650 million more stocks in India, South Korea, Taiwan and the Philippines than they sold this week, bringing the tally for those countries to more than $26 billion this year, exchange data show.

“Speculation about China’s stimulus is supportive for Asian countries that have strong trade ties with China,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Under the current environment where investors remain somewhat cautious, funds are coming to Asia and more so to the bond markets.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most-active currencies, rose 0.1 percent to 116.24 and touched a four-month high of 116.25. The ringgit jumped 0.6 percent to 3.0732 per dollar as of 4:50 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The Thai baht rose 0.5 percent to 30.94 and Taiwan’s dollar advanced 0.2 percent to NT$29.669. The Philippine peso rallied as much as 0.3 percent to 41.445, a level last seen in April 2008.

Fed Measures

Premier Wen said yesterday that China has “ample strength” to use fiscal and monetary policy to boost the economy, which grew 7.6 percent last quarter, the slowest pace in more than three years. An official report on Sept. 10 showed China’s imports unexpectedly fell 2.6 percent in August.

Goldman Sachs Group Inc., UBS AG and JPMorgan Chase & Co. are among banks predicting the Federal Reserve will undertake a third round of quantitative easing, known as QE3, at a two-day meeting starting today. The European Central Bank agreed on Sept. 6 to an unlimited debt-purchase program to help stem the sovereign crisis.

“Sentiment is pretty risk-on today,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “If the U.S. really launches QE3, it’ll attract more money into riskier assets.”

Rate Decisions

South Korea’s won advanced for a fifth day, closing up 0.2 percent at a one-month high of 1,126.50 per dollar. Fifteen of 16 economists in a Bloomberg News survey say the Bank of Korea will cut its seven-day repurchase rate to 2.75 percent from 3 percent tomorrow. One forecasts no change.

Bangko Sentral ng Pilipinas will hold its overnight rate at 3.75 percent at a policy meeting tomorrow, according to 16 of 20 economists in a separate survey. Four forecast a cut to 3.5 percent. Policy stance is appropriate for now, Deputy Governor Diwa Guinigundo said on Sept. 8.

Elsewhere, China’s yuan appreciated 0.14 percent to 6.3264 per dollar, according to the China Foreign Exchange Trade System. The Indian rupee rose 0.3 percent to 55.1950, Indonesia’s rupiah weakened 0.1 percent to 9,589 and Vietnam’s dong was little changed at 20,850.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.

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

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