Asian Currencies Have Fourth Weekly Gain on Recovery Outlook
Asian currencies had a fourth weekly gain, led by South Korea’s won, after data suggested the worst may be over for the global economy.
Chinese manufacturing expanded for the first time in three months as output and new orders climbed, a report showed Nov. 1. Taiwan released figures this week that showed its economy returned to growth in the third quarter, while U.S. factory production increased at a faster pace than forecast in October and consumer confidence reached a four-year high.
“There’s optimism about the global economic recovery and that improves risk sentiment,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “That is encouraging fund inflows into Asia and supporting the region’s stocks and currencies.”
The won strengthened 0.6 percent this week to 1,090.80 per dollar in Seoul yesterday, according to data compiled by Bloomberg. China’s yuan appreciated 0.12 percent to 6.2415, while Malaysia’s ringgit gained 0.1 percent to 3.0537 and Thailand’s baht rose 0.1 percent to 30.73.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, reached 117.98 on Oct. 31, the highest level since Feb. 29, 2012. The MSCI Asia Pacific Index of shares rose 1 percent this week.
Emerging-market bond funds had net inflows of $1.1 billion in the week through Oct. 31, the eighth week in a row that inflows have exceeded $1 billion, Morgan Stanley said in a report, citing data from EPFR Global.
China’s Purchasing Managers’ Index climbed to 50.2 in October from 49.8 in September. Fifty is the dividing line between expansion and contraction. Gross domestic product in Taiwan grew 1.02 percent from a year earlier, after a 0.18 percent decline in the previous quarter.
“Asian currencies have been trading with a positive bias,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. (WBC) in Singapore. “The evidence this week suggests that we have advanced further along from a trough point in terms of data momentum.”
The won completed its fourth weekly gain after reports this week showed South Korean exports unexpectedly rose last month and the nation’s current-account surplus approached a record high in September. Overseas funds bought $280 million more South Korean equities than they sold this week through yesterday, exchange data show.
“Positive trade and current-account surplus figures suggested the supply of dollars is abundant, and exporters converting overseas earnings also supported the won,” said Hong Seok Chan, a Seoul-based currency analyst at Daeshin Economy Research Institute. “There is speculation that monetary authorities are trying to prevent the won from strengthening beyond the 1,090 per dollar level.”
Yuan Guided Down
The yuan had a 13th weekly advance, the longest winning streak since March 2008. The central bank lowered the reference rate yesterday to a level that meant the currency had to decline to stay within the trading band.
The People’s Bank of China set the fixing 0.04 percent weaker at 6.3045 per dollar yesterday, 1.02 percent below the Nov. 1 closing level for the currency. The yuan is allowed to trade as much as 1 percent either side of the reference rate. One-month forwards traded near the biggest discount to the spot rate in four years as analysts expect the currency will reverse a three-month appreciation after next week’s U.S. elections.
“The fixing gives a signal that the PBOC desires a stable yuan at around the 6.3 level as the export outlook remains uncertain,” said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. “Fund flows should support the yuan but the fixing is curbing further gains.”
Elsewhere, the Philippine peso strengthened 0.1 percent during the week to 41.175 per dollar. Financial markets in the Southeast Asian country were shut yesterday and Nov. 1. Taiwan’s dollar was steady this week at NT$29.300, Indonesia’s rupiah lost 0.1 percent to 9,615 and India’s rupee weakened 0.4 percent to 53.8125. Vietnam’s dong was little changed at 20,850.