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Asian Currencies Complete Best Rally Since September on Stimulus

Asian currencies rose for a fourth week, the longest winning streak in seven months, on speculation central banks will provide more policy stimulus after data from China to the U.S. fanned slowdown concerns.

South Korea’s won reached a seven-week high yesterday and India’s rupee touched a two-month high on May 2, helping drive a 0.3 percent weekly gain in the Bloomberg-JPMorgan Asia Dollar Index. The European Central Bank reduced its benchmark interest rate this week, while the Federal Reserve said it would maintain its $85 billion monthly bond-purchase program. The MSCI All-Country World Index of shares advanced for a second week.

“The rally is driven by liquidity and expectations that policy makers will cap the downside,” said Roy Teo, a currency strategist at ABN Amro Bank NV in Singapore. “Strong equity performance is also supportive of risk sentiment.”

The won strengthened 1.3 percent this week to 1,097.20 per dollar yesterday, according to data compiled by Bloomberg. The Philippine peso rose 0.8 percent to 40.903 and the Indian rupee climbed 0.7 percent to 53.9775.

Emerging-market bond funds had $1.72 billion of inflows in the week to May 1, Morgan Stanley said in a report yesterday, citing data published by EPFR Global. That’s the fourth-largest inflow on record, it said.

Manufacturing Reports

Reports this week showed manufacturing growth slowed in April in China, India and the U.S., while Taiwan’s first-quarter growth trailed estimates. The Bank of Japan said April 4 that it would buy 7.5 trillion yen ($76 billion) of debt per month to stimulate its economy.

In South Korea, three of seven central bank board members favored reducing the seven-day repurchase rate at last month’s policy meeting, according to minutes released on April 30. The Reserve Bank of India cut its repurchase rate to 7.25 percent from 7.5 percent yesterday, a move predicted by 33 of 40 economists in a Bloomberg survey.

The peso touched a three-week high yesterday after Standard & Poor’s lifted the nation’s debt rating to investment grade on May 2. The company lowered its outlook on Indonesia’s rating to stable from positive, citing stalling reforms. The rupiah declined 0.2 percent in the week to 9,741 per dollar.

Thailand’s baht was the biggest loser this week, dropping 1.2 percent to 29.60 per dollar on concern the authorities may intervene to stem gains. The baht has rallied 3.2 percent this year, which is hurting exports and may slow economic growth, Commerce Minister Boonsong Teriyapirom said on May 1.

The monetary authority “seems to acknowledge the baht’s appreciation has been too rapid,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok.

Elsewhere, Malaysia’s ringgit was little changed at 3.0335 per dollar this week before general elections on May 5, and Taiwan’s dollar rose 0.3 percent to NT$29.61. China’s yuan gained 0.15 percent to 6.1556, with local markets closed from April 29 through May 1 for public holidays, while Vietnam’s dong was steady at 20,940.

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