Asian Currencies Strengthen on Japanese Stimulus, U.S. Spending
Asian currencies strengthened, led by South Korea’s won, after the Bank of Japan announced additional stimulus and U.S. consumer spending topped estimates.
The BOJ increased its asset-purchase program today by 11 trillion yen ($138 billion) to 66 trillion yen, hours after a report showed the biggest decline in industrial output since last year’s earthquake. U.S. personal spending rose by the most since February, official data showed yesterday. Chinese manufacturing expanded for the first time in three months in October, according to a Bloomberg survey before a report due Nov. 1.
“Aggressive global easing plus improving data from the U.S. and China adds up to a strong outlook for Asian currencies,” Nizam Idris, head of Asian fixed income and foreign-exchange at Macquarie Bank Ltd. in Singapore, wrote in an e-mailed response to questions. “We could get confirmation on Thursday that the Chinese economy is gradually recovering.”
The won appreciated 0.4 percent to 1,091.50 per dollar at the close in Seoul, according to data compiled by Bloomberg. Malaysia’s ringgit advanced 0.3 percent to 3.0517, while Taiwan’s dollar and the Philippine peso gained 0.1 percent to NT$29.278 and 41.213, respectively.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.2 percent and touched 117.84, near the 117.93 level reached on Oct. 25 that was the highest since February.
U.S. Household purchases rose 0.8 percent in September from a year earlier, beating the 0.6 percent forecast in a Bloomberg survey and a 0.5 percent increase in August. A survey of economists by Bloomberg News showed China’s Purchasing Managers’ Index may rise to 50.2 this month, the highest since June.
The won strengthened to a 13-month high as data showed the nation’s current-account surplus widened to near a record. The excess was $6.07 billion last month, just shy of the $6.14 billion in July. The central bank said today it will conduct a review of banks’ currency-forward positions next month, which may lead to regulation.
“There were some investors taking long positions on the dollar after the central bank’s forward-position review report,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank. “Exporters selling the greenback supported the won and triggered investors to cut their long positions.” A long position is a bet an asset will rise in value.
The ringgit reversed an earlier decline after the BOJ announcement, which followed the Federal Reserve’s decision in September to buy $40 billion of mortgage debt per month.
“It adds further stimulus into the whole global system and the immediate reaction is riskier currencies will get a further boost,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore.
China’s yuan advanced 0.05 percent to 6.2405 even as the People’s Bank of China set the currency’s daily fixing 0.06 percent weaker, the first reduction in four days. The yuan has rallied 2 percent since the end of July. The rapid appreciation isn’t sustainable and poses a hidden threat to the financial system, according to a front-page China Securities Journal commentary today.
Elsewhere, Thailand’s baht strengthened 0.1 percent to 30.71 per dollar, India’s rupee was little changed at 54.0550 and Indonesia’s rupiah weakened 0.1 percent to 9,618. The Vietnamese dong was steady at 20,848.