Asian Currencies Rise for Fifth Month on Recovery Optimism

Asian currencies strengthened for a fifth month, led by South Korea’s won, as signs of a pickup in China’s economy brightened the outlook for the region’s exports.

Gains in industrial output, retail sales and fixed-asset investment gathered pace in September in the world’s second- largest economy, reports showed this month. Taiwan, which has China as its largest trading partner, released data today that showed its economy returned to growth in the third quarter. South Korea’s factory production increased for the first time in four months, according to official figures published today.

“Some data, especially from China, improved risk sentiment,” said Tsutomu Soma, manager of the investment trust and fixed-income business unit at Rakuten Securities Inc. in Tokyo. “Funds are flowing into Asia, where the economy is relatively solid compared with other regions.”

The won appreciated 1.9 percent this month to 1,090.70 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso climbed 1.3 percent to 41.175, China’s yuan rose 0.8 percent to 6.2372 and Malaysia’s ringgit advanced 0.5 percent to 3.0470.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, gained 0.6 percent in October after the U.S., Europe and Japan stepped up measures last quarter to spur their economies.

Emerging-market bond funds attracted $44.2 billion this year through Oct. 24, compared with $15.9 billion in all of 2011, according to U.S. data research firm EPFR Global.

Signs of Recovery

Taiwan’s exports climbed for the first time in seven months in September, rising 10.4 percent from a year earlier, figures showed on Oct. 9. Thailand’s overseas shipments increased 0.2 percent, snapping a three-month decline, the Ministry of Commerce said on Oct. 24.

A report due tomorrow will show China’s manufacturing expanded in October for the first time in three months, based on the median estimate in a Bloomberg News survey of economists.

The won rose to a 13-month high of 1,090 per dollar today as official figures showed factory output expanded 0.8 percent last month from August, when it dropped a revised 0.9 percent.

“There’s not really anywhere money can flow into apart from Asian currencies, and there is an expectation that South Korean exporters will sell dollars to convert overseas earnings” before the month-end, said Kim Dong Young, a Seoul- based currency dealer for Industrial Bank of Korea. (024110) “China’s Purchasing Managers Index will show the country is headed for a soft landing, not a hard one.”

Peso Rallies

The peso completed a second monthly advance after central bank Governor Amando Tetangco said yesterday the Philippines’ economic performance and interest-rate advantage are pulling in capital from overseas.

Bangko Sentral ng Pilipinas cut its benchmark interest rate for the fourth time this year to a record-low 3.5 percent on Oct. 25, partly to slow exchange-rate appreciation and help protect exporters. Tetangco said on Oct. 26 lower rates would discourage capital inflows and curb gains in the currency.

The yuan tested the upper limit of its trading band in the past week and is set for a third monthly gain on speculation China’s growth is rebounding after a seven-quarter slowdown. The Chinese Communist Party will hold a congress starting Nov. 8 for a once-a-decade leadership transition, while the U.S. will elect its president next week.

China Rebounding

“There have been strong bets that China’s economy is rebounding and there could be more stimulus measures once the congress is over,” said Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “The U.S. presidential election also fueled calls for yuan appreciation.”

The currency touched 6.2371 per dollar on Oct. 29, the strongest level since the government unified the official and market exchange rates at the end of 1993. It has strengthened 2 percent since July.

India’s rupee lost 1.9 percent this month, poised for the biggest drop since May. The Reserve Bank of India cut its projection for gains in gross domestic product in the year through March 2013 yesterday to 5.8 percent from 6.5 percent. It predicted the pace of increases in the benchmark wholesale-price index will be 7.5 percent by March, compared with an earlier call for 7 percent.

RBI Governor Duvvuri Subbarao reduced reserve requirements for local banks by a quarter of a percentage point to a 36-year low of 4.25 percent yesterday to free up funds for lending.

Elsewhere, Thailand’s baht strengthened 0.5 percent this month to 30.66 versus the greenback, while Taiwan’s dollar appreciated 0.3 percent to NT$29.26. Indonesia’s rupiah slid 0.3 percent to 9,618, falling for a ninth straight month in the longest losing streak in at least two decades. Vietnam’s dong rose 0.2 percent to 20,848.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@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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