Bloomberg News

Asian Currencies Strengthen on Economic Growth, Rising Rates

July 13, 2011

July 13 (Bloomberg) -- Asian currencies strengthened, led by South Korea’s won, on optimism the world’s fastest economic growth and rising interest rates will attract overseas funds.

The Bank of Thailand raised borrowing costs today, while Malaysia’s central bank indicated last week that it was considering lifting interest rates further. Data today showed Chinese gross domestic product and factory output increased by more than economists forecast, and South Korean unemployment held at the lowest level since November.

“Growth among Asia’s economies still looks very solid,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The risk of inflation also suggests more possible monetary tightening. The bias is for regional currencies to strengthen.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, rose 0.2 percent, approaching a 14-year high reached on July 8. The won strengthened 0.6 percent to 1,060.49 per dollar, according to data compiled by Bloomberg. The Singapore dollar advanced 0.5 percent to S$1.2229, Thailand’s baht gained 0.4 percent to 30.25 and the Philippine peso climbed 0.4 percent to 43.055.

Emerging-market economies in Asia will expand 8.4 percent this year, compared with 2.4 percent growth in the world’s developed economies, according to forecasts made by the International Monetary Fund in April.

Chinese Growth

Chinese industrial production advanced 15.1 percent in June from a year earlier, compared with the 13.1 percent median estimate of economists in a Bloomberg survey. Gross domestic product increased 9.5 percent in the second quarter, compared with 9.7 percent in the previous three months and the 9.3 percent analysts surveyed by Bloomberg had been expecting. The yuan strengthened 0.07 percent to 6.4676 per dollar.

“China’s GDP is a good number and it’s still pretty much on track for a soft landing,” said Chua Hak Bin, Singapore- based economist at Bank of America Merrill Lynch. “The growth in Asia will hold up a lot better than what’s happening globally.”

South Korea’s June jobless rate was 3.3 percent, lower than the median estimate in a Bloomberg News survey of 3.4 percent. Finance Minister Bahk Jae Wan said the data are “unexpectedly strong.”

“Economic fundamentals have been relatively strong and that gives room for the currency to rise in the middle to longer term,” said Seo Jeong Hun, an analyst at Korea Exchange Bank in Seoul. “Currency gains have been limited by external factors such as ongoing concerns about the euro-zone debt crisis.”

Thailand Lifts Rates

The baht snapped a two-day loss as the Bank of Thailand lifted the one-day bond repurchase rate by a quarter of a percentage point to 3.25 percent. The move was predicted by 23 of 24 economists surveyed by Bloomberg, with one expecting no change.

“The rate hike is one of the factors that drives the baht stronger,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl.

Malaysia’s ringgit rose 0.4 percent to 3.0210 per dollar, following a 1.3 percent decline over the previous two days. Bank Negara Malaysia said in a July 7 statement it would consider further normalizing interest rates to safeguard price stability if domestic economic growth momentum is sustained.

“The currency fell too much in the past two days,” said Akira Banno, a treasury adviser in Kuala Lumpur at Bank of Tokyo-Mitsubishi UFJ Bhd. Expectations that Bank Negara may raise rates “sooner or later will ensure the Malaysian currency doesn’t fall too much,” he said.

The Southeast Asian nation kept its policy rate unchanged at 3 percent on July 7. Malaysia will raise its benchmark rate to 3.5 percent by year-end, according to a Bloomberg survey of economists.

Elsewhere, Indonesia’s rupiah strengthened 0.4 percent to 8,548 per dollar and Taiwan’s dollar appreciated 0.3 percent to NT$28.90. India’s rupee gained 0.3 percent to 44.5650.

--With assistance from Chien Mi Wong in Singapore, Seyoon Kim in Seoul, Elffie Chew in Kuala Lumpur, and Yumi Teso in Bangkok. Editors: Andrew Janes, James Regan

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

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net Ronnie Harui in Singapore at rharui@bloomberg.net

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


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