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Asian Currencies Gain as Concern Greece Will Exit Euro Subsides

Asian currencies advanced, led by the Philippine peso, as Greek opinion polls showed parties in favor of supporting the European bailout gaining support among voters, stoking investor appetite for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index rose for the first time in a week as Greece’s New Democracy party, which backs the bailout negotiated with international lenders, was placed first in all six opinion polls published on May 26 ahead of a June general election. A May 6 vote failed to yield a clear winner to form a government, sparking concern the nation would exit the euro should leaders reject financial aid and the agreed terms.

“It’s very much in response to some positive poll news out of Greece that’s suggesting pro-euro parties are gaining popularity,” said Christopher Gothard, head of foreign exchange at Brown Brothers Harriman (Hong Kong) Ltd. “That tends to help emerging-market currencies, particularly in Asia.”

The peso strengthened 0.5 percent to 43.545 per dollar in Manila, according to Tullett Prebon Plc. Malaysia’s ringgit gained 0.2 percent to 3.1470 and the Thai baht added 0.3 percent to 31.61. Onshore financial markets in South Korea were closed today for a public holiday.

Greece leaving the euro would have a limited effect on Asia and the country should study such an exit as a way to restore competitiveness, former Malaysian Prime Minister Mahathir Mohamad said in a May 26 Bloomberg Television interview in Tokyo.

Shares Gain

The MSCI Asia-Pacific Index of regional equities snapped a three-day loss as sentiment improved on the Greek poll results.

Emerging-market stock funds posted a third consecutive week of outflows amid Europe’s debt crisis, with a net $1.54 billion in redemptions for the period ended May 23, according to EPFR Global. Bond funds in developing countries recorded $478 million of withdrawals.

The peso rose the most in almost two months after touching a four-month low of 43.96 per dollar on May 25. Central bank Governor Amando Tetangco said last week the authorities will curb excessive currency movements if needed.

“In a period of heightened uncertainty, market participants take on defensive stances,” Tetangco said on May 25. “This trend may continue. But when more normalcy settles, we could see a move back to assets of emerging-market sovereigns and corporates that have shown fair resiliency.”

Exporter Demand

Thailand’s baht advanced, rebounding from a four-month low, amid speculation exporters will repatriate overseas income before the end of the month to pay bills.

Factory output rose for the first time in eight months in April, as more manufacturers returned to full production after last year’s floods. The industrial production index rose 0.5 percent from a year earlier after a revised 2.7 percent contraction in March, official figures released today showed.

“We will probably see usual month-end exporter demand for the currency,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Investors also calmed a little bit as the Greek people seem to want to stay in the euro zone.”

Elsewhere, Taiwan’s dollar was unchanged against the greenback at NT$29.65. India’s rupee and China’s yuan were little changed at 55.34 and 6.3454, respectively. Indonesia’s rupiah slumped 0.6 percent to 9,529.

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