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Asian Currencies Complete Quarterly Gain as Growth Spurs Inflows

Asian currencies rose this quarter, led by India’s rupee and the Malaysian ringgit, as the world’s fastest economic growth attracted funds to regional assets.

Stock markets in South Korea, India and Taiwan together attracted some $24 billion of overseas funds this year, exchange data show. Asia’s developing economies will expand 7.3 percent this year, outpacing growth of 3.6 percent in Latin America and 1.8 percent in the U.S., according to International Monetary Fund projections published in January. The euro area is forecast to contract 0.5 percent.

The rupee strengthened 4.3 percent this quarter to 50.88 per dollar in Mumbai, the best performance since mid-2009, according to data compiled by Bloomberg. The ringgit climbed 3.7 percent to 3.0598, the biggest gain since the third quarter of 2010. Thailand’s baht rose 2.3 percent to 30.85, after sliding 1.5 percent in the fourth quarter of 2011 as the nation’s worst floods in almost 70 years shut factories.

“Funds are flowing into this region, supporting currencies,” said Kozo Hasegawa, a Bangkok-based trader at Sumitomo Mitsui Banking Corp. “The pace of appreciation may not be so fast for the baht next quarter as companies may need to buy the dollar to purchase machines destroyed by the floods.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 1.5 percent this quarter, the biggest gain since December 2010. The MSCI Asia-Pacific Index of shares rose 11 percent.

Stock Inflows

In Malaysia, overseas investors bought 1.3 billion ringgit ($425 million) more local shares than they sold in January and a net 200 million ringgit in February, exchange data show. The economy is forecast to grow as much as 5 percent this year after expanding 5.1 percent in 2011, the central bank said in its annual report released March 21.

“The ringgit is in demand because of portfolio inflows, a sign that the Malaysian economy will be able to sustain growth,” said Calbert Loh, the Kuala Lumpur-based head of treasury at Bangkok Bank Bhd. “The currency is on a strengthening trend and could test 3.03 to the dollar in the near term.”

International investors poured a net $2.7 billion into Thai equities this year and $9.9 billion into government debt, according to data from the stock exchange and the Thai Bond Market Association. Gross domestic product will rise between 5 percent and 6 percent this year, the Finance Ministry said this week. The $319 billion economy expanded 0.1 percent last year, the least since 2009, amid the flooding.

Improving Economy

The won had a second quarterly advance as Bank of Korea official Kim Young Bae said in Seoul yesterday gross domestic product will increase more than forecast in the first quarter. The won strengthened 1.7 percent since December to 1,133.10 per dollar, according to data compiled by Bloomberg.

Global investors bought $9.6 billion more Korean shares than they sold since Dec. 31, the biggest net inflows since September 2009, exchange data show.

“The won is likely to strengthen further as the economic recovery gathers pace from later in the second quarter,” said Kim Sung Soon, chief currency dealer at state-run Industrial Bank of Korea in Seoul. “Net foreign buying of stocks is also providing good support for the won.”

Possible Upgrade

The Philippine peso rallied this quarter by the most since September 2010 as speculation the nation will receive a credit-rating upgrade buoyed demand for Philippine assets. Assistant Governor Cyd Amador said on March 29 the central bank is seeing “modest, manageable” inflation and a pause in the current cycle of interest-rate cuts is “on the table.”

“There are no more rate cuts in the offing and to that effect it is positive for the currency,” said Radhika Rao, an economist at Forecast Pte in Singapore. “They are not going to narrow the rate differential over the dollar any further. Inflows will remain positive.”

The peso advanced 2.2 percent this quarter to 42.92 per dollar in Manila.

Elsewhere, China’s yuan weakened 0.06 percent this quarter to 6.2980 per dollar and Taiwan’s dollar gained 2.6 percent to NT$29.530. Indonesia’s rupiah fell 1.1 percent to 9,165, a third quarterly loss.

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