South Korean Won Tops Asian Currency Gains in July on Stimulus

South Korea’s won and the Singapore dollar led gains among Asian currencies this month on optimism central banks worldwide will boost efforts to counter a global economic slowdown.

The won and the Philippine peso posted a second monthly advance after policy makers unexpectedly cut borrowing costs to shore up growth following a slide in exports. Germany and Italy pledged over the weekend to protect the euro as Europe’s debt crisis deepened. The Federal Reserve signaled this month it can boost bond purchases to inject funds into the world’s largest economy, where expansion slowed last quarter, according to data released on July 27.

“There are hopes that the euro-zone situation will improve and that the Fed will take action,” said Suresh Kumar Ramanathan, head of regional currency strategy at CIMB Investment Bank Bhd. in Kuala Lumpur. “There are increasing signs of slowdown and more stimulus efforts are warranted.”

The won strengthened 1.3 percent this month to 1,130.55 per dollar in Seoul, according to data compiled by Bloomberg. Singapore’s currency appreciated 1.7 percent to S$1.2445, the peso gained 1 percent to 41.74 and Thailand’s baht climbed 0.7 percent to 31.53. Malaysia’s ringgit advanced 1.3 percent to 3.1292.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s currencies, rose 0.2 percent, after gaining 1.2 percent in June. The index’s 60-day historical volatility climbed to 3.83 percent from 3.46 percent on June 29. The MSCI Asia-Pacific Index of stocks gained for a second month, as global funds added to their holdings in India, Indonesia and the Philippines.

Europe, U.S.

The Bank of Korea cut its seven-day repurchase rate by 25 basis points, or 0.25 percentage point, to 3 percent on July 12 while Bangko Sentral ng Pilipinas lowered its overnight rate to 3.75 percent from 4 percent on July 26. China reduced its benchmark lending and deposit rates on July 6.

The Federal Open Market Committee concludes a two-day meeting tomorrow and the European Central Bank will convene on Aug. 2. Mario Draghi, the ECB’s president, pledged last week to do whatever is needed to preserve the euro.

Official data released today showed Taiwan’s economy unexpectedly contracted last quarter from a year earlier while Korean factory output fell in June from May. Reports last week showed the U.K. economy shrank the most in more than three years last quarter, while U.S. economic growth slowed to 1.5 percent from 2 percent in the first three months of 2012.

Won, Yuan

“While the won will still be firmer today on hopes for ECB and Fed action, the production data will limit its gains,” Darius Kowalczyk, a strategist in Hong Kong at Credit Agricole CIB. “Speculation of another BoK rate cut will intensify.”

China’s yuan weakened 0.1 percent this month to 6.3627 per dollar. The currency slumped to 6.3967 on July 25, the lowest level since September, as Premier Wen Jiabao pledged to maintain curbs on the property market.

China’s Purchasing Managers’ Index of manufacturing probably rose to 50.5 in July from 50.2 in June, according to the median estimate in a Bloomberg survey of economists before a government report tomorrow. A reading above 50 denotes expansion.

“There’s a sense of caution today as some investors are worried China’s PMI could give negative surprises,” said Tommy Ong, a Hong Kong-based senior vice-president of treasury and markets at DBS Bank (Hong Kong) Ltd.

India’s rupee traded at 55.6738 per dollar, down 0.2 percent from yesterday and little changed from a month ago. The currency has rebounded 3 percent from an all-time low reached June 22. The Reserve Bank of India kept its benchmark repurchase rate at 8 percent at a review today, as predicted by 31 of 34 economists in a Bloomberg survey. Three predicted a 25 basis point reduction.

Elsewhere, Indonesia’s rupiah dropped 0.3 percent this month to 9,459 per dollar, capping a six-month slide. Taiwan’s dollar declined 0.4 percent to NT$30.01 and Vietnam’s dong was steady at 20,868.

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