Asian Currencies Gain for Fourth Week on Global Recovery Signs
Asian currencies had a fourth weekly gain, the longest winning streak since September, on optimism the global economy is recovering.
China’s economic growth accelerated for the first time in two years, with industrial output picking up, according to government figures released yesterday. Housing starts in the U.S., the world’s largest economy, topped estimates and applications for jobless benefits declined, reports showed on Jan. 17.
“There’s a lot of risk-on sentiment after U.S. data came in stronger than expected,” said Vishnu Varathan, a Singapore- based economist at Mizuho Corporate Bank Ltd. The pickup in China’s economy “is also helping Asian currencies,” he said.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, advanced 0.2 percent this week. The gauge reached a 16-month high yesterday. India’s rupee led gains, climbing 1.9 percent to 53.7050 per dollar, according to data compiled by Bloomberg. Thailand’s baht appreciated 1.8 percent to 29.74, while Malaysia’s ringgit rose 0.3 percent to 3.0103.
China’s gross domestic product increased 7.9 percent in the fourth quarter from a year earlier, after a 7.4 percent gain in the previous three months. Housing starts in the U.S. climbed 12.1 percent last month to a 954,000 annual rate, exceeding all 84 estimates in a Bloomberg survey.
“Global economic activity is finally bottoming out while tail risk has diminished,” Credit Agricole CIB analysts led by Hong Kong-based Mitul Kotecha wrote in a report released yesterday. “While there is still plenty of event risk, ultra- easy monetary policy, progress in Europe and a pickup in Chinese growth mean that markets can breathe a sigh of relief.”
The baht completed its biggest weekly advance since 2011 and touched a 17-month high of 29.72 per dollar on Jan. 17 as global funds favored higher-yielding assets. Overseas investors bought $1 billion more of sovereign debt than they sold in the four days to Jan. 17, boosting net purchases for the month to $2.6 billion, and pumped $125 million into the nation’s equities, Thai Bond Market Association and stock exchange data show.
Finance Minister Kittiratt Na-Ranong said on Jan. 17 exporters will face difficulties if the baht strengthens further. The government’s 10-year bond yield of 3.72 percent compares with 1.86 percent in the U.S. and 0.75 percent in Japan.
“Funds are flowing into the whole of Asia, especially Southeast Asia, and Thailand is one of the most attractive places,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “It’s possible to see smoothing operations to slow the pace of the appreciation, but they may not aggressively intervene to weaken the baht.”
India’s rupee rose to an 11-week high yesterday after the government allowed state refiners to gradually increase diesel prices, a move that may help rein in energy subsidies and shore up public finances.
Finance Minister Palaniappan Chidambaram is seeking to cut spending on subsidies as part of a plan to narrow the budget deficit to 5.3 percent of gross domestic product and avoid a downgrade in the sovereign debt rating.
Elsewhere in Asia, the Philippine peso advanced 0.1 percent this week to 40.575 against the greenback, and the Chinese yuan traded at 6.2154 compared with 6.2161 at the end of last week. South Korea’s won dropped 0.2 percent to 1,057.08, Taiwan’s dollar fell 0.1 percent to NT$29.06, while Indonesia’s rupiah was little changed at 9,630.