Asian Currencies Strengthen in Week on Signs of China Recovery

South Korea’s won led gains in Asian currencies this week as data signaled China’s economy is improving, brightening the outlook for the region’s exports.

A manufacturing slump is easing in the world’s second- largest economy, a private survey indicated on Oct. 24, and reports earlier in the month showed growth in exports and investment gathered pace in September. The Federal Reserve said this week it will maintain its bond-purchase program, a policy that boosts the supply of dollars that can be invested in emerging-market assets. All but one of 27 economists surveyed by Bloomberg News expect the Bank of Japan to add to stimulus for the second time in two months next week.

“We are seeing signs of recovery in China and that is leading to optimism the global economy will also improve,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “Easy monetary stances by central banks will continue for a while and more funds may flow into Asia.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, climbed 0.2 percent this week, the most since the five-day period ended Oct. 12, to 117.75 as of 4:08 p.m. in Hong Kong. The won rose 0.6 percent to 1,097.03 per dollar, according to data compiled by Bloomberg. China’s yuan gained 0.08 percent to 6.2489 and touched a 19-year high of 6.2380 today. Taiwan’s dollar traded at NT$29.30 versus NT$29.286 a week ago.

Financial markets in Singapore, Malaysia, the Philippines and Indonesia are closed for a holiday today. In India, bond and currency markets are shut while equities were traded.

‘Cross Trades’

The won advanced to a 13-month high as speculation Japan’s central bank will loosen monetary policy spurred demand for riskier assets. At the BOJ’s last meeting on Oct. 5, the bank refrained from more easing after expanding its asset-purchase program by 10 trillion yen ($125 billion) in September. The yen declined 0.8 percent this week versus the dollar.

South Korea’s gross domestic product expanded 1.6 percent in the third quarter from a year earlier, the slowest pace since 2009, central bank data showed today. Finance Minister Bahk Jae Wan said in a Bloomberg News interview on Oct. 9 that economic growth reached a “bottom” in the third quarter.

“With the dollar-yen exchange rate rising, some investors are entering cross trades of selling the yen and buying the won,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Inc. “With European issues relatively calm, investors are focusing on Korea’s economic fundamentals, which look relatively good although growth is still slow.”

Yuan Rally

The yuan reached the upper limit of the central’s bank trading range for a second day on speculation policy makers will allow more appreciation as China’s exports recover.

The currency’s advance exceeded the People’s Bank of China’s reference rate by the maximum allowed 1 percent. The daily fixing was raised 0.06 percent today to 6.3010. Overseas sales climbed 9.9 percent in September, the fastest pace in three months, the customs bureau said on Oct. 13.

“China’s exports have been stabilizing and rebounding, which helps boost bets on yuan appreciation,” said Liu Dongliang, a senior analyst at China Merchants Bank Co., the nation’s sixth biggest lender. “The pace of appreciation so far this month is a bit surprising.”

Elsewhere, the Thai baht fell 0.1 percent to 30.75 per dollar. The Philippine peso rose 0.4 percent this week to 41.208 through yesterday while India’s rupee advanced 0.5 percent to 53.575 and Indonesia’s rupiah declined 0.1 percent to 9,605 in the same period. Malaysia’s ringgit added 0.35 percent to 3.0430 in the first four days of the week.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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