Won Leads Gains in Asian Currencies This Week on Equity InflowsLilian Karunungan
South Korea’s won led gains in Asian currencies this week as international investors added to holdings of the region’s stocks.
The won advanced for a third week after data showed the Korean economy expanded the most in more than two years in the second quarter. The Bloomberg-JPMorgan Asian Dollar Index rose 0.1 percent from July 19 as global funds bought $1.4 billion more stocks than they sold this week through July 25 in South Korea, Taiwan and Thailand, exchange data show.
“Risk appetite has improved,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “People are coming back to this part of the region. There is still a huge growth opportunity in Asia.”
The won strengthened 0.9 percent this week to 1,111.33 per dollar in Seoul, according to data compiled by Bloomberg. India’s rupee appreciated 0.5 percent to 59.0450, the Philippine peso rose 0.1 percent to 43.305 and the Taiwan dollar advanced 0.1 percent to NT$29.950.
Fund flows to emerging markets have increased after Federal Reserve Chairman Ben S. Bernanke said this month the U.S. economy needs “highly accommodative monetary policy for the foreseeable future,” easing concern the central bank will scale back asset purchases that have boosted dollar supply.
South Korea’s gross domestic product rose 1.1 percent in the three months ended June 30 from the previous period, the most since the first quarter of 2011, a central bank report showed July 25. The figures signal the economy is overcoming the impact of a weak yen, with expansion still driven by exports, Bank of Korea Governor Kim Choong Soo said yesterday, as a separate report showed a gauge of consumer confidence in the country held at a 13-month high in July.
“Stable fundamentals such as GDP growth and the current-account surplus should support the won,” said Son Eun Jeong, a currency analyst at Woori Futures Co. in Seoul. “Fund inflows to Korean stocks also turned around this week.”
South Korea’s economy will grow about 1 percent each quarter in the second half, driven by a global recovery and sustained monetary-policy stimulus, Kwon Goohoon, a Seoul-based economist at Goldman Sachs Group Inc., wrote in a July 25 research note. The current account, the broadest measure of trade, stood at a record surplus of $8.6 billion in May.
The rupee completed a third weekly advance after the central bank took steps to tighten cash supply to increase support for the currency.
The Reserve Bank of India capped the amount lenders can borrow in daily repurchase auctions at 0.5 percent of their deposits, it said in a July 23 statement. The authority also raised the daily balance requirement for lenders’ cash-reserve ratios to 99 percent from 70 percent effective July 27.
The peso had its biggest weekly gain in a month after Moody’s Investors Service on July 25 placed the nation on review for investment grade.
“Philippine assets, especially the currency, should react positively to the country’s sovereign rating being put on review for possible upgrade by Moody’s,” Dariusz Kowalczyk, Hong Kong-based senior economist and strategist at Credit Agricole CIB, wrote in a research note.
The Southeast Asian nation doesn’t need further stimulus as domestic growth is strong, and the outlook for the global economy suggests the use of caution in monetary policy, central bank Governor Amando Tetangco said yesterday in an interview on Bloomberg Television.
Elsewhere in Asia, China’s yuan rose 0.1 percent in the past five days to 6.1316 per dollar. The Indonesian rupiah weakened 1.8 percent to 10,265, the Malaysian ringgit dropped 0.5 percent to 3.2077 and the Thai baht lost 0.3 percent to 31.13.