Asian Currencies Rise as China CPI Adds to Monetary Easing Odds

Asian currencies strengthened as China reported inflation eased for a fourth month in July, adding to speculation policy makers will take more measures to stimulate growth in the world’s second-biggest economy.

Consumer prices in China, a key export market for many Asian nations, rose 1.8 percent from a year earlier after a 2.2 percent increase the previous month, the National Bureau of Statistics reported today. The Bank of Korea and Bank Indonesia left interest rates unchanged as the MSCI Asia Pacific Index of shares advanced for a fourth day, taking its gain this week to 3.4 percent.

“China’s low consumer prices gave the currency and stock markets a boost,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “It’s good news for the markets because it’ll give the central bank more room to cut rates.”

India’s rupee strengthened 0.3 percent to 55.2663 per dollar as of 2:34 p.m. in Mumbai, according to data compiled by Bloomberg. South Korea’s won appreciated 0.3 percent to 1,125.48, Indonesia’s rupiah added 0.2 percent to 9,471 and China’s yuan advanced 0.04 percent to 6.3590. The Bloomberg-JPMorgan Asia Dollar Index rose by the most in almost a week and touched the highest level since May.

China is the largest export market for South Korea, Taiwan and Thailand. Overseas sales account for about two-thirds of Taiwan and Thailand’s economies and about half of Korea’s. The moderation of inflation may promote further monetary policy easing, the China Securities Journal reported today, citing Li Kai, deputy director at the State Information Center.

Rallying Ringgit

“Growth is the government’s priority and easing inflation definitely allows policy makers to be more aggressive,” said Banny Lam, chief economist at CCB International Securities in Hong Kong. “That’ll hold a weakening bias for the yuan for now, while investors are still looking for more signals to confirm the effectiveness of China’s stimulus measures.”

The ringgit approached a 12-week high after Malaysia reported yesterday that exports rose 5.4 percent in June, more than the median estimate for a 3.1 percent gain in a Bloomberg survey. Official today showed factory output climbed 3.7 percent in June, an 11th monthly increase. The ringgit added 0.1 percent to 3.1042 per dollar, taking its rally in the past month to 2.7 percent, the best performance among Asia’s 11 most-traded currencies.

“Yesterday’s export numbers showed that the economy has held up pretty well and that helps to support the ringgit,” said Choong Yin Pheng, manager for economic and bond research at Hong Leong Bank Bhd. in Kuala Lumpur.

Korean Stocks

The won strengthened as foreign investors pumped the most money into South Korean stocks in more than a year. Overseas funds bought 1.57 trillion won ($1.4 billion) more local equities than they sold, according to preliminary data from Koscom Corp., which provides financial data from the Korea Exchange Inc. That was the most since July 8, 2011.

Elsewhere, the Philippine peso strengthened 0.1 percent to 41.762 against the greenback. Taiwan’s dollar rose 0.2 percent to NT$29.940, Thailand’s baht climbed 0.1 percent to 31.49 and Vietnam’s dong was little changed at 20,855.

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