Bloomberg News

Asian Currencies Gain This Week on Rate Outlook, Greece Plan

July 02, 2011

July 2 (Bloomberg) -- Asian currencies had their biggest weekly advance since April, led by South Korea’s won and the Malaysian ringgit, as regional central banks raised interest rates and concern eased that Greece will default.

Taiwan raised borrowing costs on June 30 following increases last month in India and Korea, boosting the yield advantage for the region’s debt. Overseas investors were net buyers of more than $1.6 billion of stocks in India, Indonesia, Korea, Thailand, Taiwan and the Philippines this week. Lawmakers in Greece backed a bill to authorize an austerity plan required to keep rescue aid flowing.

The vote in Greece “has allowed investors to think beyond the euro-region and realize that growth prospects in Asia are stronger than rest of the world,” said Mirza Baig, a Singapore- based currency strategist at Deutsche Bank AG. “The regional central banks are raising interest rates and that shows the confidence of policy makers in their economies. We have seen inflows into equities.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, rose 0.56 percent, the most since the week ended April 1. The won rose 1.2 percent this week to 1,069 per dollar, according to data compiled by Bloomberg. The ringgit strengthened 1.2 percent to 3.01 and India’s rupee added 0.9 percent to 44.59.

Greek Prime Minister George Papandreou’s drive to stave off the euro area’s first sovereign default was boosted when lawmakers approved a budget-cutting package.

Rate Increases

Taiwan’s central bank raised the discount rate on 10-day loans to banks to 1.875 percent from 1.75 percent. All 18 economists in a Bloomberg News survey predicted the decision, after increases of the same amount in each of the previous four quarters.

The won advanced for a second week after a government report yesterday showed inflation accelerated. Consumer prices rose 4.4 percent, after a 4.1 percent gain in May, exceeding the central bank’s target for a sixth straight month. Exports increased 14.5 percent in June from a year earlier, resulting in a trade surplus of $3.3 billion.

“The rise in consumer prices is reinforcing market sentiment that authorities may allow the won to appreciate, in order to alleviate price pressure,” said Byeon Ji Young, currency analyst at Woori Futures Co. in Seoul.

Exports Rise

The ringgit completed the first weekly gain in a month after global funds added to holdings of the nation’s assets. Foreign investors raised ownership of ringgit-denominated debt by 93 percent in May from a year earlier to 181.5 billion ringgit ($60.3 billion), according to data published Bank Negara Malaysia late yesterday.

Exports rose 11 percent in May from a year earlier after having increased 11.1 percent the previous month, according the median forecast of economists in a Bloomberg survey before government data due on July 5.

“The market is reacting to the positive headlines even though Greece by no means is out of the woods yet,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.

Elsewhere, Indonesia’s rupiah gained 0.7 percent to 8,538 against the dollar, Singapore’s dollar appreciated 0.8 percent to S$1.2268, the Philippine peso appreciated 0.8 percent to 43.125 and Taiwan’s dollar advanced 0.4 percent to NT$28.788. Thailand’s baht weakened 0.4 percent to 30.80 before July 3 elections that may trigger political unrest.

--With assistance from Seyoon Kim in Seoul and David Yong in Singapore. Editors: Sandy Hendry, Ven Ram

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

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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