Bloomberg News

Pimco Sees Asia’s Currency Gains Supported by Fed Rate Policy

February 07, 2012

Feb. 7 (Bloomberg) -- Pacific Investment Management Co. predicts Asian currencies, which had the best start to a year since 2006 last month, will gain support as near-zero U.S. interest rates fuel demand for higher-yielding assets.

The yuan, last year’s biggest gainer in the region excluding Japan, will rise further as China sustains relatively fast economic growth and its policy makers seek to expand the currency’s international usage, Ramin Toloui, global co-head for emerging markets at Pimco, which runs the world’s largest bond fund, said in an interview. Asia accounts for more than 11 percent of the $1.35 trillion of assets the company managed at the end of 2011, according to a statement on Jan. 11.

The Bloomberg-JPMorgan Asia Dollar Index climbed to the highest level since September on Feb. 3 after data showed manufacturing picked up in China and India. Global funds poured $13 billion this year into Indian, Indonesian, Korean, Taiwanese and Thai stocks, exchange data show, as the Federal Reserve signaled it will keep rates near zero through late 2014.

“The Fed policy is definitely a supporting factor for Asian currencies over a medium-term horizon,” Toloui said in Hong Kong today. Any hard-landing for China “is a tail-risk scenario, but not what we would regard a scenario around which we build our portfolio,” he said.

The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, has rallied 2.1 percent this year. India’s rupee led gains with an 8.5 percent advance to 48.92 per dollar, according to data compiled by Bloomberg. Malaysia’s ringgit strengthened 5.2 percent to 3.0168 while the yuan was little changed at 6.3052. The Chinese currency climbed 4.7 percent against the dollar in 2011.

Economic Growth

China’s gross domestic product expanded 8.9 percent in the final three months of 2011 from a year earlier, according to official data. India’s government may estimate that the nation’s economy will expand 7 percent in the 12 months through March, according to the median of 15 forecasts in a Bloomberg News survey before a report due today. Indonesia’s GDP expanded 6.46 percent last year, the fastest pace since 1996, government data showed yesterday.

Expansion in Asia’s biggest economy would be cut almost in half if Europe’s debt crisis worsens, the International Monetary Fund said yesterday. China may be headed for a “rough landing,” Singapore Prime Minister Lee Hsien Loong told CNN in an interview aired on Feb. 5.

‘Less Aggressive’

Chinese Premier Wen Jiabao introduced a 4 trillion yuan ($634 billion) stimulus package and froze yuan gains for almost two years to counter the effects of the 2008 financial crisis. Wen reiterated last week his government will “fine-tune” policies to support growth amid the European debt crisis.

“In China, there’s recognition that the last round of policy stimulus now presents threats to the economic outlook going forward,” said Toloui. “This time, it’s likely to be an easing of policies, if we get a renewed problem in Europe, but it’s going to be less dramatic and less aggressive.”

China cut the reserve requirements for banks in November for the first time since 2008 to free up funds for lending and support the economy.

Toloui relocated to Singapore in January from the Pimco’s headquarters in Newport Beach, California. The company boosted its Asia-Pacific headcount by 20 percent last year to 140 employees, according to the Jan. 11 statement.

--Editors: Anil Varma, Andrew Janes

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

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


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