Asia Currencies Gain as U.S. Data Aids Stocks Before Europe Meet

Asian currencies strengthened as signs the U.S. economy is improving outweighed concern European leaders will be unable to prevent the region’s debt crisis from worsening.

The Philippine peso and Taiwan’s dollar advanced for a second day as Asian stocks rebounded from a four-day slide. The S&P/Case-Shiller index of property values in 20 U.S. cities fell 1.9 percent in April from a year earlier, the smallest drop since November 2010, the group said yesterday. European leaders meet for two days in Brussels from tomorrow and Italian Prime Minister Mario Monti said the talks will be “very difficult.”

“You get some good data on and off and that is keeping the market range-bound,” said Suresh Kumar Ramanathan, head of regional currency strategy at CIMB Investment Bank Bhd. in Kuala Lumpur. “The market is hoping for progress in Europe.”

Indonesia’s rupiah advanced 0.6 percent to 9,450 per dollar as of 3:50 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The peso rose 0.2 percent to 42.370, Taiwan’s dollar gained 0.1 percent to NT$29.960 and South Korea’s won climbed 0.2 percent to 1,156.17.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, was little changed after rising the most in a week yesterday. The gauge has declined 2.3 percent this quarter. Its 60-day historical volatility was steady at 2.92 percent today, compared with 3.42 percent on March 30.

Indonesian Bonds

German Chancellor Angela Merkel hardened her opposition to joint euro-area bonds ahead of the European summit, while Egan-Jones Ratings Co. cut Germany’s credit ranking to A+ from AA-yesterday after downgrading Spain last month.

The rupiah snapped a three-day drop after global investors raised holdings of the nation’s bonds. Overseas funds bought 1.6 trillion rupiah ($169 million) more sovereign notes than they sold last week, finance ministry data show.

“We have seen foreign investors return to Indonesia’s bonds,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The rupiah is still driven by sentiment, and investors are expecting results from the summit that can produce long-term solutions.”

Thailand’s baht fell toward a three-week low on speculation dollar demand from importers will exceed local-currency purchases by exporters. Southeast Asia’s second-largest economy had a trade deficit of $1.7 billion in May as an 18 percent rise in imports outpaced 7.68 percent gain in overseas sales, government data showed this week. The currency lost 0.2 percent to 31.88, extending its decline this quarter to 3.2 percent.

Rupee Drops

“The deficit in the trade balance may continue for a while as imports of machinery related to last year’s floods have been climbing,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “The baht tends to see downward pressure from this.”

India’s rupee dropped 0.2 percent to 57.1612 per dollar. The currency touched a record-low 57.3275 on June 22 and has lost 11 percent this quarter, making it Asia’s worst performer.

Elsewhere, the yuan gained 0.12 percent to 6.3554 per dollar after the People’s Bank of China set its reference 0.06 percent stronger. Malaysia’s ringgit weakened 0.1 percent to 3.1939 and the Vietnamese dong advanced 0.2 percent to 20,888.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE