Asia Currencies Advance as Obama’s Re-Election Supports Inflows

Asian currencies rose this week as President Barack Obama’s re-election increased the likelihood the Federal Reserve will keep boosting the supply of dollars that can be invested in emerging markets.

Global funds pumped a net $256.5 million into Taiwanese and Philippine stocks this week, exchange data show, while buying $71 million more Thai sovereign notes than they sold, according to Thai Bond Market Association figures. China’s yuan snapped a 13-week rally, its longest winning streak since March 2008, on speculation the nation will struggle to boost export growth as the fiscal cliff looms in the U.S. and Europe’s debt crisis remains unresolved.

“While there will be plenty of liquidity provided by the Fed, there’s an issue over the fiscal cliff, making investors reluctant to take riskier positions,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds are coming into emerging markets.”

The Taiwan dollar advanced 0.5 percent this week to NT$29.150 against the greenback in Taipei, according to data compiled by Bloomberg. Thailand’s baht, South Korea’s won and the Philippine peso gained 0.3 percent to 30.65, 1,087.85 and 41.052, respectively. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was unchanged yesterday.

Peso Bonds

Obama faces negotiations with a Republican-led House to avoid more than $600 billion of tax increases and spending cuts that are set to take effect in January, the so-called fiscal cliff. Republican challenger Mitt Romney had said he wouldn’t reappoint Fed Chairman Ben S. Bernanke in 2014. The central bank chief announced a third round of asset purchases in September and said interest rates may remain near zero until mid-2015.

The peso traded near a four-year high after the Southeast Asian nation raised the equivalent of $750 million from a sale of 10-year global peso bonds, which will be settled in dollars. President Benigno Aquino has won upgrades to the nation’s credit ratings this year from Moody’s Investors Service and Standard & Poor’s as he takes steps to reduce the budget deficit and lure foreign cash.

“We still like the Philippines, given the improving fundamentals,” Wee-Ming Ting, the Singapore-based head of Asian fixed-income at Pictet Asset Management, which oversees more than $24 billion of emerging-market debt, said Nov. 8.

Yuan Limit

The yuan traded little changed at 6.2450 per dollar yesterday and touched the upper limit of its band for a fifth day. Consumer prices rose 1.7 percent in October from a year earlier, the least since January 2010, official data showed. The median estimate in a Bloomberg survey was for a 1.9 percent gain. China’s central bank governor and statistics chief signaled October data will show improving growth.

“There have been inflows betting on a rebound in the economy,” said Bruce Yam, a currency strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “Easing inflation signals China’s growth is still subdued, which boosts the case for more measures to stimulate consumption.”

India’s rupee dropped 1.7 percent this week to 54.7550 per dollar on concern U.S. tax increases and spending cuts will aggravate the global slowdown.

Elsewhere, Malaysia’s ringgit declined 0.3 percent this week to 3.0640 after the central bank kept its overnight policy rate on hold at 3 percent Nov. 8. Indonesia’s rupiah fell 0.1 percent to 9,620 and Vietnam’s dong held at 20,848.

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