Bloomberg News

Asian Currencies Strengthen as Oil Prices Retreat, U.S. Home Sales Climb

February 28, 2012

Asian currencies advanced, led by Malaysia’s ringgit and the South Korean won, as oil prices fell and a pickup in U.S. home sales brightened the outlook for regional exports.

Indonesia’s rupiah snapped a five-day slide after crude declined for a second day in New York, retreating from a nine- month high. The European Central Bank will offer three-year loans under its longer-term refinancing operation, or LTRO, to banks tomorrow. Federal Reserve Chairman Ben S. Bernanke will give a semi-annual monetary policy report to lawmakers tomorrow and may suggest a third round of quantitative easing is possible.

“Oil coming off is a good sign,” said Roy Teo, a currency strategist at ABN Amro Private Bank in Singapore. “The LTRO should help sentiment and if Bernanke comes out with a dovish tone for QE3, then it could weaken the dollar and support high- yield currencies.”

The ringgit rose 0.5 percent to 3.0093 per dollar as of 4:23 p.m. in Kuala Lumpur, while the won strengthened 0.4 percent to 1,124.43, according to data compiled by Bloomberg. The Thai baht appreciated 0.3 percent to 30.37 and the Philippine peso gained 0.3 percent to 42.845.

Banks took 489 billion euros ($658 billion) at the first LTRO in December and will borrow 470 billion euros tomorrow, the median of 28 estimates in a Bloomberg survey showed. The Fed is replacing $400 billion of shorter-maturity Treasuries in its holdings with long-term debt to cap borrowing costs.

‘Psychological Boost’

South Korea’s won rose by the most since Feb. 17, after data yesterday showed pending U.S. home resales climbed 2 percent last month after a 1.9 percent drop in December. South Korea recorded a current-account deficit of $772.2 million in January, the first shortfall since February 2010, a central bank report showed.

“The market received a psychological boost from the good U.S. data,” said Hwang Sun Min, a Seoul-based currency dealer at Kookmin Bank, the nation’s largest lender by assets.

The Philippine peso rebounded from a one-month low of 43.11 per dollar reached yesterday. The currency is supported by rising capital inflows that include remittances from overseas workers, central bank Governor Amando Tetangco said in a speech in Manila today.

“We have determined to take a pragmatic approach by allowing some appreciation in the exchange rate and to balance this by building up reserves to accommodate inflows,” he said.

Stronger Yuan

China’s yuan gained 0.03 percent to 6.3001 per dollar in Shanghai. The People’s Bank of China fixed its daily reference rate 0.04 percent stronger at 6.2961.

China’s current-account surplus is estimated to have narrowed to 3 percent of gross domestic product in 2011, the State Administration of Foreign Exchange said in a statement posted on its website yesterday. China will prevent abnormal capital flows, SAFE said.

It’s “unrealistic” for China to rely on exports to drive future economic growth like it did in the past, World Bank President Robert Zoellick told reporters in Beijing today.

“China will face political pressure on the yuan’s exchange rate again once the crisis in Europe subsides, so the path to a 3 percent appreciation should be intact,” said Tommy Ong, the Hong Kong-based senior vice-president of treasury and markets at DBS Bank (Hong Kong) Ltd.

Elsewhere, Indonesia’s rupiah gained 0.4 percent to 9,129 per dollar, India’s rupee advanced 0.3 percent to 49.098 and Singapore’s dollar climbed 0.2 percent to S$1.2528. The Vietnamese dong was unchanged at 20,830. Financial markets in Taiwan are closed for a holiday.

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

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


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