Korean Won Leads Gains in Asia on Fed, China Boost; Yuan Weakens

South Korea’s won rallied for a fourth week, leading gains among Asian currencies, after the Federal Reserve expanded its monetary stimulus and Chinese data signaled an economic recovery is strengthening.

The won completed its biggest weekly advance in two months as exchange data showed foreign investors bought $1.2 billion more local stocks than they sold this week through yesterday, the most among markets outside Japan tracked by Bloomberg. The Fed said on Dec. 12 it will buy $45 billion a month of Treasuries starting in January, in addition to $40 billion a month of existing mortgage-debt purchases.

“Asian currencies are strengthening as the region is likely to receive more foreign funds after the Fed’s move,” said Lee Jin Ill, a Seoul-based currency dealer at Hana Bank. “What’s on the mind of traders in Korea is that the government may roll out more restrictive measures to slow the pace of the won’s gain.”

The won appreciated 0.6 percent this week to 1,074.68 per dollar in Seoul, according to data compiled by Bloomberg. India’s rupee gained 0.2 percent to 54.343, Taiwan’s dollar advanced 0.1 percent NT$29.102 and Thailand’s baht climbed 0.1 percent 30.65 against the U.S. currency.

Investors plowed more than $2 billion into stock markets in India, Indonesia, Taiwan and Thailand this week.

‘Risk-On Sentiment’

“Market sentiment has been risk-on this week as the Fed is going to print more money,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co.

India’s rupee traded near a one-week high after a government report today showed inflation eased to 7.24 percent in November from 7.45 percent a month earlier. Factory output rebounded in October, a report on Dec. 12 showed.

“With the easing of inflation, there is clearly scope for the Reserve Bank of India to support growth,” said Vivek Rajpal, a strategist at Nomura Holdings Inc. in Mumbai. “It is only a matter of time before they cut interest rates.”

China’s yuan extended a decline from a 19-year high on speculation authorities intervened to curb its gains after factory output and consumer spending climbed.

Government reports on Dec. 9 showed China’s industrial production and retail sales in November recorded their biggest gain since March, while exports growth slowed to 2.9 percent from 11.6 percent. China including Hong Kong is the biggest export market for South Korea, Malaysia and Taiwan.

The yuan fell for a third week, losing 0.2 percent to 6.2415 versus the dollar. It has weakened 0.3 percent from a 19- year high of 6.2223 on Nov. 27.

“We’re hearing a lot of implicit messages from the Chinese authorities that they aren’t looking for rapid appreciation,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. “The last reading for Chinese export growth wasn’t that great.”

South Korea announced last month more restrictions on the amount of currency forward positions banks are allowed to hold as exchange-rate appreciation threatens exports. The Philippines is also mulling curbs.

Elsewhere, Indonesia’s rupiah weakened 0.4 percent to 9,695 and the Philippine peso fell 0.4 percent to 41.090, the most in a month. Malaysia’s ringgit gained 0.1 percent from a week ago to 3.0543 per dollar while the Vietnamese dong was little changed at 20,848.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

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