Asian Currencies Advance in Week as U.S. Default Concern Eases

Asian currencies rose for a second week as optimism U.S. lawmakers will raise the debt limit to avoid a default spurred demand for riskier assets.

Indonesia’s rupiah led the advance as the Bloomberg-JPMorgan Asia Dollar Index increased 0.2 percent from Oct. 4. The MSCI Asia Pacific Index of stocks climbed for a fourth day yesterday, the longest winning streak since Sept. 12, after House Republicans proposed yesterday a short-term increase in the debt ceiling that would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17.

“Markets are pricing in some kind of resolution in the U.S., therefore there is some modest positioning for Asian currencies,” said Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank Ltd. in Singapore. “When it happens, Asian currencies will bump up quite aggressively. The week started with some concern.”

Indonesia’s rupiah climbed 1.4 percent from a week ago to 11,365 per dollar in Jakarta, according to prices from local banks compiled by Bloomberg. India’s rupee appreciated 0.6 percent to 61.08, while Malaysia’s ringgit gained 0.1 percent to 3.1788. China’s yuan fell 0.03 percent to 6.1220 and Taiwan’s dollar added 0.04 percent to NT$29.490.

U.S. President Barack Obama told Republicans during a White House meeting that he wants to raise the debt limit and end a partial government shutdown, Representative Hal Rogers of Kentucky said Oct. 10. The Republican proposal released Oct. 10 included only a short-term increase in the debt limit.

U.S. Debt

If the U.S. fails to raise the borrowing cap by Oct. 17, the government will have $30 billion plus incoming revenue to pay its bills. It would start missing scheduled payments, including benefits, salaries and interest, between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

The rupiah completed a second weekly gain after Bank Indonesia set guidelines on Oct. 9 for individuals and companies, including state-owned firms, to hedge against currency swings. Indonesia’s current-account deficit at 2.5 percent to 2.7 percent of gross domestic product in 2014 would be “acceptable,” compared with 4.4 percent in the second quarter, Senior Deputy Governor Mirza Adityaswara said yesterday.

“Longer-term strengthening in the rupiah will be data-dependent, with all eyes on the external balance,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “We will see more impact on the volatility starting next month as local companies take out hedges.”

Rupiah Technicals

The rupiah is set to rebound from its biggest loss since 2000, trading patterns suggest. Its relative-strength index, calculated on a monthly basis to smooth out volatility, was as high as 89 at the end of September, the most-oversold level in more than 15 years. The rupiah plunged 16.1 percent this year through Oct. 10, the biggest since a 27 percent tumble in 2000.

The ringgit rose for a second day as the benchmark stock gauge, the FTSE Bursa Malaysia KLCI Index, gained 0.6 percent, the most this month. Official data last week showed Malaysia’s overseas shipments expanded 12.4 percent in August, more than the median 4.7 percent estimate in a Bloomberg News survey. The U.S. is the nation’s fourth-biggest export market.

“Optimism that the U.S. will avoid a default is helping to boost sentiment on Asian currencies,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The ringgit could strengthen further as the U.S. is one of Malaysia’s major trading partners.”

Elsewhere in Asia, South Korea’s won fell 0.1 percent in the past five days to 1,071.40, the Philippine peso lost 0.2 percent to 43.145 and the Thai baht was little changed at 31.283. Vietnam’s dong rose 0.1 percent to 21,095.