Bloomberg News

Asia Currencies Gain in Best Start Since 2006 on Fed Rate Pledge

January 26, 2012

Jan. 26 (Bloomberg) -- Asian currencies advanced in the best start to a year since 2006 as the Federal Reserve signaled it will extend near-zero interest rates, spurring demand for higher-yielding assets in the region.

The Bloomberg-JP Morgan Asia Dollar Index rose for a second day, contributing to a 1.6 percent gain for the month, after the Fed said it expects interest rates to stay near zero through 2014. Malaysia’s ringgit reached the highest level since Sept. 13. South Korea’s won traded at the strongest level in more than two months as investors pumped $4.5 billion into the local stock market in January, according to exchange data.

“The global weakness of the dollar gave an early boost to Asian currencies including the won,” said Kim Sung Soon, chief currency dealer at state-run Industrial Bank of Korea. “Growth isn’t slowing enough to shake confidence.”

The ringgit appreciated 1.3 percent to 3.042 per dollar as of 3:55 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The won closed 0.4 percent stronger at 1,121.82 and the baht gained 0.8 percent, the most this year, to 31.35. Financial markets in China, Taiwan and India are closed for a public holiday.

The Fed said yesterday that it sees “exceptionally low” interest rates through 2014, having previously pledged to refrain from raising borrowing costs until at least the middle of 2013. Policy makers kept their target rate between zero and 0.25 percent, unchanged since December 2008, to secure a recovery from the global credit-market crisis.

Korea GDP Report

All 13 economists forecast Bank Negara Malaysia will keep its overnight rate at 3 percent at a policy meeting on Jan. 31, unchanged since May last year, according to a Bloomberg News survey.

The yield on Malaysia’s 4.262 percent notes due September 2016 was 3.18 percent, a 238 basis point premium over similar- maturity U.S. Treasuries, up from as low as 120 on Feb. 8, 2011. Indonesia’s 10-year bonds yield 365 basis points more than benchmark U.S. bonds.

“Bernanke’s statement boosted risk appetite,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Investment Bank in Kuala Lumpur.

The won advanced as a Bank of Korea report showed today that Asia’s fourth-largest economy grew at an annual rate of 3.4 percent in the final quarter of 2011 after a 3.5 percent gain in the preceding three months.

The Philippine peso advanced 0.6 percent to 42.84. The economy grew 3.7 percent in the final three months of 2011 from a year earlier, compared with 3.2 percent in the preceding quarter, according to the median estimate of economists in a Bloomberg survey before a government report on Jan. 30.

Elsewhere, Indonesia’s rupiah strengthened 0.7 percent to 8,968 and China’s yuan gained 0.05 percent to 6.2958 in the offshore market in Hong Kong.

--With assistance from Elfie Chew in Kuala Lumpur. Editors: Sandy Hendry, Ven Ram

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

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net.

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


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