Won Leads Asia Weekly Currency Gains on Fed Easing; Yuan Weakens

South Korea’s won rallied for a fourth week, leading gains among Asian currencies, after the Federal Reserve expanded its monetary stimulus. The yuan fell the most in five months after China’s export growth slowed.

The won had its biggest gain in eight weeks as exchange data showed foreign investors bought $1.2 billion more local stocks than they sold over the last five days, the largest net inflows since September. The Fed said on Dec. 12 it will buy $45 billion a month of Treasuries starting in January, in addition to $40 billion a month of existing mortgage-debt purchases.

“Asian currencies are strengthening as the region is likely to receive more foreign funds after the Fed’s move,” said Lee Jin Ill, a Seoul-based currency dealer at Hana Bank. “What’s on the mind of traders in Korea is that the government may roll out more restrictive measures to slow the pace of the won’s gain.”

The won appreciated 0.6 percent this week to 1,074.68 per dollar in Seoul, according to data compiled by Bloomberg. Indonesia’s rupiah rose 0.2 percent to 9,638, Thailand’s baht climbed 0.2 percent 30.63 and Taiwan’s dollar advanced 0.1 percent NT$29.102. Global funds plowed more than $2 billion into stock markets in India, Indonesia, Taiwan and Thailand this week.

China Exports

The yuan fell for a third week, losing 0.2 percent to 6.2436 versus the dollar. It has weakened 0.3 percent since reaching a 19-year high of 6.2223 on Nov. 27. China’s export growth slowed to 2.9 percent from 11.6 percent in November, while industrial production and retail sales had their biggest gains since March, data showed in the past week.

“We’re hearing a lot of implicit messages from the Chinese authorities that they aren’t looking for rapid appreciation,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “The last reading for Chinese export growth wasn’t that great.”

South Korea last month tightened restrictions on the amount of currency forward positions banks are allowed to hold as won gains pose a risk to exports. Vice Finance Minister Shin Je Yoon said Dec. 11 the government is concerned about herd behavior in won trading, and moves in “one direction” will be the most important factor in making a decision on whether to tighten the management of capital flows.

The Philippine peso fell 0.4 percent this week to 41.090 per dollar, trimming this year’s advance to 6.7 percent. The central bank will implement a new measure this month to deal with “risk-sensitive” capital inflows as interest-rate reductions alone are no longer enough, central bank Governor Amando Tetangco said yesterday.

Bangko Sentral ng Pilipinas has banned overseas investors from its special-deposit accounts and ordered lenders to provide more funds to cover risks on non-deliverable currency forwards. Other measures being considered to curb inflows include new limits on currency forwards and a review of their risk premiums, Tetangco said on Dec. 3.

Elsewhere, India’s rupee closed at 54.485 per dollar, little changed from 54.475 on Dec. 7. Malaysia’s ringgit ended the week at 3.0573, from 3.0578 on Dec. 7, and Vietnam’s dong was also steady at 20,848. Singapore’s dollar fell less than 0.1 percent to S$1.2214.

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