Bloomberg News

Asian Currencies Gain as Growth Outlook Outweighs Europe Debt

October 19, 2011

Oct. 19 (Bloomberg) -- Asian currencies rose, led by South Korea’s won, on speculation the region’s growth outlook will attract foreign investment even as the world’s developed economies falter.

Global funds have bought $1.8 billion more Indonesian, South Korean, Taiwanese and Thai equities than they sold so far this month, according to exchange data. The Bloomberg-JPMorgan Asia Dollar Index climbed for a second day after China released data yesterday that showed industrial production and retail sales beat economists’ estimates in September.

“Risk appetite may not be that great, but if you compare Asia’s growth with developed nations, Asia is still better,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Still, Europe’s debt issue will continue to be a key factor to set the tone for the market.”

The won closed 1.2 percent stronger at 1,132.30 per dollar, according to data compiled by Bloomberg. Malaysia’s ringgit gained 0.7 percent to 3.1115, Thailand’s baht advanced 0.2 percent to 30.68 and Taiwan’s dollar climbed 0.3 percent to NT$30.100.

The International Monetary Fund predicted last month that Asia’s developing economies will expand 8.2 percent in 2011, compared with 1.5 percent in the U.S. and 1.6 percent in the euro area. China’s third-quarter gross domestic product slowed to 9.1 percent from 9.5 percent in the previous three months, data showed yesterday.

The Bank of Thailand held its one-day bond repurchase rate at 3.5 percent today, a decision predicted by 16 of 17 economists surveyed by Bloomberg. One forecast a 25-basis point reduction.

Currency-Swap Deal

The won touched a one-month high after the nation agreed to increase a currency-swap accord with Japan to $70 billion, helping to counter concern Europe’s debt crisis will worsen.

“Market players are finding it hard to take a strong position ahead of the European summit, making the won move within a certain range,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Exporters’ selling dollars to convert income may support the currency.”

Speculation European leaders are closer to reaching agreement on a plan to stem the region’s debt crisis also supported Asian currencies today. The U.K.’s Guardian newspaper reported yesterday that Germany and France support boosting a rescue package to 2 trillion euros ($2.8 trillion). The two nations have yet to agree on how to bolster the European bailout fund, a person with direct knowledge of the talks told Bloomberg, declining to be named as the discussions are not public.

“The risk-on dynamic has developed in anticipation of better news from Europe,” said Robert Minikin, a senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong.

Philippine Inflation Outlook

The Philippine peso rose toward a one-month high on speculation policy makers will tolerate currency gains to rein in inflation rather than raise borrowing costs. The currency gained 0.3 percent to 43.158 per dollar.

All 17 economists surveyed by Bloomberg predict the central bank will keep the benchmark overnight rate at 4.5 percent tomorrow, the highest level in more than two years. Policy settings are appropriate and there is no compelling reason to change approach while the government embarks on a $1.7 billion stimulus program, Bangko Sentral ng Pilipinas Governor Amando Tetangco said Oct. 16.

“The policy rate is about right given that inflation is still elevated,” said Arthur Michael de Castro, an analyst at Bank of the Philippine Islands in Manila. “We are still looking at a fairly strong third-quarter gross domestic product and more upside to the peso with support from strong remittances.”

Elsewhere, China’s yuan rose 0.06 percent to 6.3775 per dollar. Indonesia’s rupiah and India’s rupee climbed 0.2 percent to 8,801 and 49.19 per dollar, respectively.

--With assistance from Judy Chen in Shanghai. Editors: Andrew Janes, Simon Harvey

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

To contact the reporters on this story: Andrea Wong in Taipei at awong268@bloomberg.net Yumi Teso in Bangkok at yteso1@bloomberg.net

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


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