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Baht Leads Weekly Advance in Asian Currencies on Growth Optimism

Asian currencies gained this week, led by the Thai baht and Indonesia’s rupiah, on optimism the region’s economies are improving.

Thailand’s overseas sales climbed 16.1 percent in January from a year earlier, exceeding the 13.4 percent median estimate in a Bloomberg survey and the 13.5 percent gain in December, official data showed on Feb. 27. Malaysia’s improving exports and domestic demand will help the economy expand 5 percent this year, according to an International Monetary Fund staff forecast. Currency gains were limited on concern Europe’s debt crisis and U.S. spending cuts will deter risk-taking.

“The growth differentials between Asia and the developed world will attract flows of portfolio investment,” said Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. “There are concerns related to Italy, China and the U.S. that may delay the further influx of funds in the near term. But we believe they may give good buying opportunities.”

The baht strengthened 0.3 percent this week to 29.75 per dollar as of 3:25 p.m. in Bangkok, according to data compiled by Bloomberg. The rupiah climbed 0.3 percent to 9,675, the ringgit advanced 0.2 percent to 3.0967 and the Chinese yuan appreciated 0.2 percent to 6.2237. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active Asian currencies excluding the yen, rose 0.1 percent.

The U.S. Senate rejected a pair of partisan proposals yesterday to replace $85 billion in automatic spending cuts set to begin today, which the International Monetary Fund says will hurt global growth. Italy had inconclusive election results this week, spurring concern Europe’s debt crisis will worsen.

China Manufacturing

China’s manufacturing slowed for a second month, with the Purchasing Managers’ Index at 50.1 in February, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with the 50.5 median estimate in a Bloomberg News survey of 31 analysts and 50.4 in January. A reading above 50 indicates expansion.

The baht had a second weekly advance as data showed overseas funds increased holdings of the nation’s debt. International investors bought $2.7 billion more sovereign notes than they sold in February, according to figures from the Thai Bond Market Association.

“The central bank has quite a bullish growth outlook and that is positive for further fund inflows,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “A surge in imports also shows domestic demand is strong, and that fits in with the growth story.”

Indonesian Rupiah

The rupiah had the first week of gains since the five days ended Feb. 8. Foreign funds bought $255 million more local stocks than they sold this week through yesterday, driving the Jakarta Composite Index of shares to an all-time high today. The economy may expand 6.3 percent this year, compared with 6.2 percent in 2012, according to a Bloomberg survey.

“The rupiah’s strengthening has been driven by demand from foreign funds for local assets,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Investors are still seeking higher returns where they can find it, and they see strong growth potential in Indonesia.”

The ringgit touched the highest level in almost two weeks yesterday. Malaysia’s gross domestic product may expand faster in 2013 than last year’s 5.6 percent pace, driven by investment and domestic consumption, Nor Mohamed Yakcop, a minister in Prime Minister Najib Razak’s department, was quoted as saying in a Feb. 23 Business Times report. Najib, who must dissolve parliament by April 28 to call for polls, has embarked on a 10-year, $444 billion infrastructure spending plan.

Election Risk

“A lot of the Economic Transformation Program projects are going to kick in in a bigger way this year, so that will help sustain investment,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “In the short term, people will still be focused on the event risk, which is the elections.”

Malaysia will tighten rules on the daily setting of a key dollar-ringgit reference rate from today in an effort to boost transparency and shield the domestic market against manipulation, according to a draft statement from the Financial Markets Association of Malaysia obtained by Bloomberg yesterday.

India’s rupee weakened 1 percent from a week ago to 54.75 per dollar after the government announced yesterday an increase in annual spending. Finance Minister Palaniappan Chidambaram boosted his expenditure target for the year starting April 1 by 16 percent to 16.7 trillion rupees ($306 billion), fueling concern public finances will worsen.

Elsewhere in Asia, Taiwan’s dollar was little changed from last week at NT$29.666 against the greenback, according to prices from Taipei Forex Inc. The Philippine peso was at 40.688, versus 40.685 on Feb. 22.

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