Bloomberg News

Asian Currencies Gain a Third Week on Rising Rates, U.S. Risk

June 03, 2011

June 4 (Bloomberg) -- Asian currencies gained for a third week on speculation regional central banks will keep raising interest rates to stem inflation, boosting the yield advantage on local assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies, climbed 0.2 percent for the week as demand for the dollar waned after Moody’s Investors Service said the U.S. risks losing its top credit rating. The Thai baht had the best week in more than a month after the central bank lifted benchmark borrowing costs on June 1 to 3 percent, the fourth increase this year. That compares with 1.25 percent in the European Union and a maximum 0.25 percent in the U.S.

The Dollar Index dropped 0.8 percent this week to 74.373, before a U.S. Labor Department report showed slowing job growth. Malaysia’s ringgit climbed 0.7 percent to 3.0120 per dollar in Kuala Lumpur, Taiwan’s currency advanced 0.5 percent to NT$28.750 and the baht rose 0.2 percent to 30.33.

“The Moody’s report changes the ballgame and shifts investors’ focus from Europe to the U.S.,” said Suresh Kumar Ramanathan, a foreign-exchange strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The ringgit is holding firm because of the knock-on effect from the dollar weakness.”

Moody’s said on June 2 America’s Aaa rating may be cut should there be “no progress” on lifting the $14.3 trillion debt limit along with efforts to cut the budget deficit.

U.S. Jobs

Employers in the U.S. added a less-than-projected 54,000 jobs in May after a revised 232,000 gain in April, according to Labor Department figures yesterday. The median forecast in a Bloomberg News survey was for payrolls to rise 165,000. The U.S. jobless rate climbed to 9.1 percent in May.

A report from ADP Employer Services on June 1 showed companies added 38,000 workers, less than the 175,000 predicted in a separate Bloomberg survey.

The Bank of Thailand lifted its one-day bond repurchase rate by a quarter of a percentage point this week after inflation accelerated to a 32-month high of 4.19 percent in May. Rates remain “low” and the pace of tightening is “still appropriate,” Assistant Governor Paiboon Kittisrikangwan said after the policy meeting.

“People in the market now predict more rate hikes than previously expected, providing support to the baht,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok.

Taiwan’s dollar climbed the most in the five days in more than a month as exporters repatriated earnings. Overseas investors bought $879 million more local stocks than they sold this week, after net sales of $996 million last week, according to exchange data.

Kept Selling

“Many exporters kept selling the U.S. dollar in the past two weeks before potential further appreciation of the Taiwan dollar,” said Henry Lin, a Taipei-based foreign-exchange trader at Taiwan Shin Kong Commercial Bank.

Elsewhere, South Korea’s won rose for a third week, climbing 0.2 percent to 1,080.08 per dollar, according to data compiled by Bloomberg. China’s yuan advanced 0.19 percent to 6.4794, the Philippine peso climbed 0.4 percent to 43.213 and Indonesia’s rupiah strengthened 0.5 percent to 8,531. India’s rupee added 0.7 percent to 44.87.

--With assistance from Yumi Teso in Bangkok, Elffie Chew in Kuala Lumpur and Andrea Wong in Taipei. Editors: Simon Harvey, Paul Tighe

%VND %KRW %KRW %USD %SGD %THB %PHP %TWD %IDR %MYR %HKD %CNY

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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