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Asian Currencies Halt Advance as Recent Gains Judged Excessive

Asian currencies halted a five-day advance as some investors judged recent gains as excessive and after data showed economic growth slowed for a seventh quarter in China, the region’s biggest export market.

The Bloomberg-JPMorgan Asia Dollar Index’s 14-day relative-strength index was at 72 today, above the 70 level that indicates to some traders that a decline is likely. The gauge has rallied 2.2 percent in the second half. Asia’s biggest economy expanded 7.4 percent in the third quarter from a year earlier, official figures showed today, after growing 7.6 percent in the previous three months. China is the biggest buyer of goods shipped from South Korea, Taiwan and Thailand.

“Technically, some consolidation is necessary for Asian currencies after their recent rallies,” said Tsutomu Soma, manager of the investment trust and fixed-income business unit at Rakuten Securities Inc. in Tokyo. “There remains concern about China’s slowdown and with that, it’s hard for investors to aggressively buy riskier assets.”

The Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, fell 0.03 percent to 117.81 as of 4:43 p.m. in Hong Kong. The measure touched 117.87 yesterday, the highest level since February. The Philippine peso fell 0.4 percent to 41.32 per dollar, India’s rupee slipped 0.2 percent to 53.975 and Indonesia’s rupiah dropped 0.2 percent to 9,594 per dollar, according to data compiled by Bloomberg.

The rupee halted a two-day gain also before European leaders begin a two-day summit in Brussels today to tackle their debt crisis. Global funds cut holdings of Indian shares on Oct. 16 for the first time since Sept. 20, the latest regulator data show. Prime Minister Manmohan Singh’s government took steps last month to cut fuel subsidies and allow more foreign investment in some industries.

Capital Outflows

“We are seeing outflows, which is the main factor driving the rupee,” said Vikas Babu, a trader at Andhra Bank in Mumbai. “At times when global risk appetite is low, there is also increased concern about whether the government can go through with and implement its proposed reforms.”

The peso retreated from the strongest level in more than four years on speculation importers stepped up dollar purchases to take advantage a more favorable exchange rate.

The peso opened at 41.12 per dollar, the highest level since March 2008. It has advanced 6.1 percent this year, the second-best performance among the 11 most-active Asian currencies, as foreign funds bought $1.9 billion more local equities than they sold, according to exchange data.

Yuan Strengthens

“The 41.00 to 41.20 range appears to be a support level” for the dollar versus the peso, said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “This level is a sweet spot for importers.” A support is a level on a price chart that analysts predict will act as a floor in a declining market.

China’s yuan added 0.07 percent to 6.2503 per dollar and touched a 19-year high of 6.2446 as the central bank set the daily fixing at the strongest level since June 20. Premier Wen Jiabao said the government is confident of achieving annual targets as economic growth has started to stabilize, the official Xinhua News Agency reported yesterday. U.S. Republican presidential candidate Mitt Romney reiterated he will label China a currency manipulator if he wins next month.

“The yuan got support from various factors including the political pressure from the U.S. elections and the central bank’s reference rate,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “Some investors are convinced that China’s economy will regain growth momentum.”

Elsewhere, Malaysia’s ringgit depreciated 0.2 percent to 3.0385 per dollar and Thailand’s baht declined 0.1 percent to 30.64. Taiwan’s dollar fell 0.1 percent to NT$29.269, while South Korea’s won rose 0.1 percent to 1,104.38. Vietnam’s dong was little changed at 20,845.

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