Asian Currencies Rise This Week on Growth Outlook, Fund Inflows

Asian currencies gained this week, led by the Thai baht and Malaysia’s ringgit, as regional growth that’s forecast to surpass developed markets and relatively high yields attract investors.

The baht appreciated the most for a week since March after the central bank signaled currency gains that are in line with the regional trend can be tolerated. The ringgit reached a 13-year high after Malaysia reported its economy expanded faster than economists predicted in the second quarter and the monetary authority eased currency curbs.

“Asia’s economy is stronger than other regions and there’s the outlook for interest-rate hikes in some countries,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “So investors are pouring money into the region selectively.”

The baht rose 1.2 percent this week to 31.51 per dollar in Bangkok, according to data compiled by Bloomberg. The ringgit advanced 1 percent to 3.1395 and the Philippine peso gained 0.6 percent to 45.025.

Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund said on July 7.

Stock exchange data show global funds have pumped more than $22 billion into India, South Korea, Indonesia and Taiwan this year as central banks around the region raise interest rates.

Baht Gains

Thailand’s currency has climbed 0.3 percent since central bank Governor Tarisa Watanagase said on Aug. 18 that the bank is “not concerned” about the baht’s gains, provided it moves in line with other Asian currencies. The rising baht won’t hurt the nation’s export competitiveness, she said.

“After the central bank said they are not concerned about the baht’s strength, interbank players sold the dollar against the baht,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl, the nation’s biggest lender. “Foreigners are still buying the Thai baht for investment.”

Economists in a Bloomberg survey predict the Bank of Thailand will increase borrowing costs by a quarter of a percentage point on Aug. 25 to 1.75 percent.

Malaysia’s ringgit reached its strongest level since 1997 after data this week showed the economy expanded 8.9 percent in the second quarter, beating the 8.4 percent median forecast in a Bloomberg survey of economists. Domestic companies can now settle cross-border transactions in ringgit and exporters can hedge currency risks beyond a previous 12-month threshold, Bank Negara Malaysia said on Aug. 18.

Philippine Remittances

The Philippine peso climbed as data showed money sent home by overseas citizens, which accounts for about a 10th of the economy, climbed the most in five months in June. The currency also approached its strongest level in three months after bids for a retail government bond totaled almost five times the amount on offer.

“The momentum is there,” said Rafael Algarra, treasurer at Security Banking Corp. in Manila. “We should probably see the peso continue to strengthen. Remittances remain strong.”

The Vietnamese dong dropped 2.1 percent to 19,475 after the central bank this week devalued the currency for a third time in the past year to boost exports.

Elsewhere, the Singapore dollar gained 0.7 percent this week to S$1.3539 against its U.S. counterpart and the Indonesian rupiah rose 0.1 percent to 8,973. Taiwan’s dollar climbed 0.1 percent to NT$31.935. South Korea’s won was little changed at 1,183.13 from 1,183.70 a week earlier.

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