Asian Currencies Gain This Week on Growth Outlook; Rupiah Drops

Asian currencies advanced this week as economic data from China to South Korea sparked optimism regional growth is picking up. The rupiah fell as Indonesia said it will allow declines to spur exports.

Manufacturing in China rose at the fastest pace in seven months, South Korea’s current-account surplus widened and Taiwan’s factory output grew more than estimated, reports showed this week. Global investors pumped more than $5 billion this month into six Asian emerging stock markets tracked by Bloomberg.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.15 percent in the past five days and 0.6 percent this quarter. The won strengthened 0.7 percent since June 20 to 1,013.60 per dollar in Seoul, while Taiwan’s dollar and the Malaysian ringgit gained 0.3 percent to NT$29.962 and 3.2135, respectively, according to data compiled by Bloomberg.

“The Korean won has done well and that’s a continuing story of current-account surplus,” said Mirza Baig, BNP Paribas SA’s Singapore-based head of Asia currency and rates strategy. “There have been massive inflows into Taiwan’s stock market. There’s some fundamental support for these North Asian currencies.”

The won recorded its biggest five-day advance in eight weeks and reached 1,013.25 yesterday, the strongest level since August 2008. South Korea’s current-account surplus widened to $9.3 billion in May from $7.1 billion in April, central bank data showed yesterday. The nation attracted $10.07 billion of foreign direct investment in the first half, up from $8 billion a year earlier, according to a government report.

Taiwan Output

Taiwan’s industrial output rose 5.19 percent from a year earlier in May, exceeding the median estimate of economists for a 2.75 percent gain, a June 23 report showed. The island’s central bank held its key interest rate at 1.875 percent at a meeting June 26 while expanding mortgage restrictions.

The rupiah retreated 0.2 percent in the past five days to 11,995 per dollar and reached a four-month low of 12,110 yesterday, according to prices from local banks. Bank Indonesia has allowed the currency to become temporarily undervalued to increase competitiveness of exports while reducing imports, Senior Deputy Governor Mirza Adityaswara told reporters in Jakarta June 24.

Indonesia Deficit

Southeast Asia’s largest economy had a trade deficit of $1.96 billion in April, the biggest since July, as exports dropped 3.16 percent, official figures showed this month. The central bank held its key interest rate at 7.5 percent on June 12 after data in May showed the current-account shortfall narrowed to $4.19 billion in the first quarter from $4.31 billion the previous three months.

“Indonesia can’t depend only on monetary policy to address the current-account deficit, but it also needs to revive exports,” said Mika Martumpal, treasury research and strategy head at PT Bank CIMB Niaga in Jakarta.

Elsewhere in Asia, India’s rupee climbed 0.2 percent this week to 60.0850 per dollar and China’s yuan strengthened 0.13 percent to 6.2181. The Philippine peso rose 0.1 percent to 43.753, Thailand’s baht was little changed at 32.471, while Vietnam’s dong slipped 0.1 percent to 21,330.

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