Peso Leads Asian Currency Gains on Optimism for Spending Boost

Asian currencies rose toward a four-month high, led by the Philippine peso and Malaysia’s ringgit, on optimism regional economies have scope to combat slowdowns by boosting state spending.

The peso gained the most in almost two weeks after the government reported a third monthly budget surplus for 2012 in August. The ringgit approached its highest level since May ahead of Prime Minister Najib Razak’s annual address to Parliament tomorrow, when he may announce more steps to spur consumer spending and boost economic growth. Concern Europe’s debt crisis will worsen may damp interest in riskier assets, said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc.

“The Philippines and Malaysia would have the fiscal space to deal with the slowdown from the external side,” said Singapore-based Tanuwidjaja. “I don’t see a massive gain in Asian currencies. Globally, markets are still looking at the developments in Europe.”

The peso strengthened 0.4 percent to 41.870 per dollar in Manila, data compiled by Bloomberg show. The ringgit appreciated 0.3 percent to 3.0755, South Korea’s won advanced 0.4 percent to 1,116.30 and India’s rupee gained 0.4 percent to 53.31.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies outside Japan, rose 0.1 percent to 116.86 and has gained 1.4 percent this quarter. It reached 117.06 on Sept. 21, the highest level since May 2.

Growth Outlook

Asian economies excluding Japan will expand 6 percent this year, outpacing growth of 2.1 percent in the U.S., according to latest forecasts from Morgan Stanley. The euro area will contract 0.5 percent, the U.S.-based company predicts.

Spain’s borrowing costs rose yesterday, with 10-year yields topping 6 percent, as calls for national elections raised concern a new government will abort efforts to bring down fiscal spending and debt. Protesters marched for a second night in Madrid, urging Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts.

The peso advanced as improving state finances reinforced speculation the Southeast Asian nation’s credit rating will be raised to investment grade. The budget surplus in August was 2.52 billion pesos ($60 million), compared with a deficit of 39.2 billion pesos for July. Revenue rose 4.2 percent, while spending gained 10.4 percent.

“The budget surplus was pretty encouraging,” said Tanuwidjaja. “The Philippines is looking very confident in getting an investment grade.”

Philippine Rating Optimism

Standard & Poor’s raised the Philippines’ debt rating to BB+, one step below investment grade, in July, citing the improvement in the balance of payments and growth prospects. Moody’s Investors Service, which ranks the country at the second-highest junk level, boosted its outlook to positive in May.

The ringgit climbed the most this week before tomorrow’s 2013 budget announcement. The currency touched 3.0333 on Sept. 14, the strongest level since May 4.

“The tabling of the budget on Friday could be one factor that’s supporting the ringgit,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “There will be more handouts to help the low- and middle-income groups.”

Exporters Selling

Malaysia’s 2013 budget will be 259 billion ringgit ($84 billion), bigger than last year’s record 232.8 billion ringgit, Citigroup Inc. estimates. The government, which joined counterparts from Thailand to the Philippines in increasing spending to protect their economies from the European debt crisis and a faltering U.S. recovery, proposed in June to expand the 2012 annual allocation by 13.4 billion ringgit.

The won strengthened to a one-week high as stocks rallied and on speculation exporters repatriated income ahead of next week’s holiday.

The Kospi index of shares reversed an earlier loss to close up 0.4 percent after a report showed Chinese industrial companies’ profits dropped for a fifth month in August, boosting speculation authorities in Beijing will do more to support economic growth. The Dollar Index fell for the first time in four days. Local financial markets are closed Oct. 1 for a public holiday.

“We saw more exporters selling dollars to repatriate income as the end of the month approaches,” said Lee Jin Ill, a Seoul-based currency dealer at Hana Bank. “With the dollar weakening against other currencies and shares rising, there was some risk-on sentiment.”

Elsewhere in Asia, Taiwan’s dollar climbed 0.3 percent to NT$29.420 against its U.S. counterpart. Indonesia’s rupiah rose 0.1 percent to 9,594, Thailand’s baht was steady at 30.98 and China’s yuan was little changed at 6.3025. Vietnam’s dong was steady at 20,880.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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

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