Bloomberg News

Asia Currencies Hover Near 14-Year High on Rate, Growth Outlook

July 06, 2011

July 6 (Bloomberg) -- The Philippine peso led gains among Asian currencies on speculation global funds will pump more funds into the region to profit from rising interest rates and the world’s fastest economic growth.

The Bloomberg-JPMorgan Asia Dollar Index was within 0.1 percent of a 14-year high after China, India, South Korea, Indonesia, Taiwan, Thailand, Malaysia and the Philippines all raised borrowing costs this year to tame inflation, widening the gap with the U.S. Federal Reserve’s near-zero benchmark rate. Reports yesterday showed that consumer-price gains quickened in Taiwan and the Philippines, bolstering the case for further monetary tightening.

The peso gained 0.4 percent to 42.90 per dollar as of the 4 p.m. close in Manila, touching a two-month high of 42.825 earlier, according to Tullett Prebon Plc. South Korea’s won rose 0.3 percent to 1,063.45, according to data compiled by Bloomberg.

“The prospect of rate increases is definitely supportive for regional currencies,” said Kenichiro Ikezawa, a fund manager at Daiwa SB Investments Ltd. in Tokyo. “Compared with other emerging markets, Asia looks to be the most attractive because of its economic fundamentals.”

Developing economies in Asia will expand 8.4 percent in 2011, outpacing growth of 2.5 percent in the U.S. and 2 percent in the euro region, according to International Monetary Fund estimates released last month. Global funds bought $503 million more Korean and Thai shares than they sold yesterday, exchange data show.

Yield Gap

Benchmark interest rates of 7.5 percent in India and 6.75 percent in Indonesia compare with a maximum 0.25 percent in the U.S. and Japan. Malaysia’s central bank will boost its policy rate tomorrow by a quarter of a percentage point to 3.25 percent, according to 10 of 15 economists surveyed by Bloomberg. Five forecast no change.

Malaysia’s consumer prices rose 3.3 percent in May from a year earlier, the most since March 2009, a government report showed last month. Prices in the Philippines increased 5.2 percent in June and those in Taiwan climbed 1.9 percent.

The Philippine peso appreciated for a seventh day, its longest winning streak since January, after Fitch Ratings forecast the economy will expand as much as 6 percent this year and next. Growth was 4.9 percent in the first quarter, the weakest pace since the final three months of 2009.

“The Fitch comments are validating the improved macro fundamental story that’s been making the rounds the past few weeks,” said Radhika Rao, an economist at Forecast Pte in Singapore.

Elsewhere, the Thai baht, the Singapore dollar and India’s rupee were all little changed at 30.49 per dollar, S$1.2279 and 44.4363, respectively, according to data compiled by Bloomberg. Indonesia’s rupiah and Malaysia’s ringgit slid 0.1 percent to 8,541 and 3.0090, respectively. Taiwan’s dollar declined 0.2 percent to 28.851 and China’s yuan was little changed at 6.4670.

--With assistance from Karl Lester M. Yap in Manila and Suryani Omar in Jakarta. Editors: James Regan, Ven Ram

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

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

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


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