Bloomberg News

Asian Currencies Advance for a Second Week on Share Purchases

October 14, 2011

Oct. 15 (Bloomberg) -- Asian currencies had a second weekly gain, led by South Korea’s won, on optimism European leaders will act to stem the debt crisis, spurring investors to buy emerging-market assets.

Foreign funds bought $1.7 billion more stocks than they sold this week through yesterday in Taiwan, South Korea, Taiwan and Thailand. Finance ministers and central bankers from the Group of 20 will conclude talks in Paris, after people familiar with the matter said yesterday that euro-area governments are revamping their strategy to combat the debt turmoil which marks its second anniversary next week.

“Foreign investors were buying Asian stocks as concern over the European debt crisis eased a bit for now,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “However, the problem is not fundamentally solved and those external factors will influence the markets for the time being.”

The won strengthened 1.9 percent this week to 1,156.13 per dollar at the close in Seoul, according to data compiled by Bloomberg. Malaysia’s ringgit advanced 0.9 percent to 3.1302 and while Taiwan’s dollar rallied 0.6 percent to NT$30.300.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.7 percent this week. The MSCI Asia-Pacific Index of shares rallied 3.4 percent for the same period.

Currency Forecasts

Asian currencies will extend their slide in the third quarter in the three months through December before rebounding in early 2012 as export demand picks up, said Standard Chartered Plc, the most-accurate forecaster for the region.

The global economy isn’t likely to see another recession as it did in 2008 as Europe will “muddle through” its debt crisis and U.S. policy makers will stave off a downturn, said Thomas Harr, head of Asian currency strategy at Standard Chartered in Singapore. Nations from China to Brazil are considering increasing the International Monetary Fund’s lending resources to help stem the European debt crisis, Group of 20 and IMF officials said.

The won halted a five-week decline as Bank of Korea Governor Kim Choong Soo said in a Oct. 13 interview that inflation is likely to exceed the central bank’s 4 percent target limit this year and board members haven’t discussed cutting interest rates. South Korean President Lee Myung Bak and his U.S. counterpart Barack Obama agreed on the need for currency stability, Lee’s office said in a statement after a summit in Washington.

Korean Won

The currency slid as much as 0.8 percent yesterday after Standard & Poor’s cut Spain’s ratings yesterday to AA- from AA, citing a likely deterioration of the nation’s bank assets.

“The Spain downgrade dealt a blow to sentiment in the market,” said Nam Kyung Tae, Seoul-based currency dealer at state-run Industrial Bank of Korea. “Still, any sharp decline in the won is blocked by the news of currency-stabilization cooperation with the U.S.”

Bank of Korea’s Kim and his board held the benchmark seven- day repurchase rate at 3.25 percent for a fourth straight month, the central bank said in Seoul on Oct. 13.

The won, Asia’s worst performer last quarter, will drop 1.8 percent per dollar during the current three-month period and climb 7.1 percent in the first quarter of next year, according to Standard Chartered.

The ringgit completed a second weekly gain after Prime Minister Najib Razak forecast economic growth will quicken next year.

Malaysia’s Growth

Gross domestic product may rise as much as 6 percent from a maximum of 5.5 percent this year and the country’s budget deficit is forecast to narrow to 4.7 percent of GDP from 5.4 percent, Najib said last week. Industrial output rose a faster- than-expected 3 percent from a year earlier in August after contracting a revised 0.5 percent in July, according to a Statistics Department report on Oct. 11.

The ringgit held its advance yesterday after neighboring Singapore said it will slow gains in its currency rather than halt appreciation.

“The ringgit is firmer for the week because of better local economic data,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. Still, “the pressure for the ringgit to weaken is still there given the global uncertainties.”

Elsewhere, Thailand’s baht gained 0.5 percent this week to 30.78 per dollar, the Philippine peso rose 0.4 percent to 43.375, while Indonesia’s rupiah climbed 0.6 percent to 8,848. China’s yuan advanced 0.12 percent to 6.3785.

--With assistance from Kyoungwha Kim in Singapore, Elffie Chew in Kuala Lumpur and Fion Li in Hong Kong. Editors: Anil Varma, Ven Ram

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; 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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