Asia Currencies Rise This Week as Growth Outlook Boosts Inflows

Asian currencies advanced this week, led by the biggest five-day gain in South Korea’s won in two months, as reports on manufacturing signaled regional growth.

The Bloomberg-JPMorgan Asia Dollar Index strengthened 1.1 percent for the week to 115.30. South Korea’s won appreciated 1.9 percent to 1,138.55, according to data compiled by Bloomberg. India’s rupee climbed 1.6 percent to 45.1060 and the Singapore dollar added 1.1 percent to S$1.3059.

Expansion in factory production accelerated in China, South Korea, Taiwan and Singapore over the past two months, official data showed this week, bolstering the outlook for Asian exporters. The International Monetary Fund forecasts the region’s economies will expand at a faster pace than developed nations this year.

“Some good data support risk appetite,” said Minori Uchida, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “Asian growth is solid and currencies will continue to strengthen, but probably at a slower pace than this year.”

Overseas investors bought more stocks than they sold in South Korea, Taiwan and Thailand this week and were net buyers in India in the first three days of the week, exchange data show. The IMF predicts Asia’s developing economies will expand 9.4 percent in 2010, compared with 2.7 percent in advanced countries.

Korea Tensions

The won rose for a third day yesterday as investor concern over tensions on the Korean peninsula eased and U.S. data boosted optimism that the world’s biggest economy is recovering.

South Korea’s currency has rebounded 3 percent since reaching a two-month low of 1,172.50 on Nov. 24, the day after the North attacked an island in the South using artillery, killing four people and prompting retaliatory fire.

South Korea’s military said on Dec. 2 it is preparing to carry out live-fire artillery drills along its disputed western sea border on Dec. 6. North Korea has increased the number of multiple rocket launchers in its armed forces, bolstering its capability to attack Seoul, Yonhap News reported yesterday, citing a South Korean official it didn’t identify.

“We saw risk aversion rising in the early part of the week,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “But things were better by the second half of the week with the positive data from the U.S. and China.”

Manufacturing Reports

A report on Dec. 2 showed Singapore’s Purchasing Managers’ Index climbed to 51.4 in November from 50.7 in October, the highest level since July, while China’s logistics federation said on Dec. 1 its index rose to 55.2 from 54.7 in October. ADP Employer Services reported this week that U.S. companies took on 93,000 workers last month, the most since November 2007. Data from the Institute for Supply Management showed manufacturing expanded for a 16th month.

India’s rupee rose this week by the most since the five-day period ended Oct. 1 on speculation Asia’s second-fastest growing major economy will draw investors to new share offerings by local companies.

Shipping Corp. of India Ltd., the country’s biggest sea carrier, and the government may raise $240 million in a share offering that opened on Nov. 30, Chairman S. Hajara said Nov. 26. A sale by MOIL Ltd., India’s largest producer of manganese ore, closed on Dec. 1 with bids for 56 times the 33.6 million shares offered, according to the National Stock Exchange.

“Share sales are boosting the rupee,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. in Mumbai. “I see the rupee holding around 45 to the dollar.”

Elsewhere this week, the Philippine peso advanced 0.8 percent to 43.895 per dollar and the Thai baht gained 0.5 percent to 30.05. The yuan climbed 0.1 percent to 6.6633 and Taiwan’s dollar added 0.3 percent to NT$30.745. Indonesia’s rupiah was little changed from Nov. 26 at 9,009.

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