Bloomberg News

Asia Currencies Pare Weekly Losses on Record Yuan Reference Rate

March 23, 2012

Asian currencies advanced, paring weekly losses, after China’s central bank set the yuan’s rate at a record high, boosting the outlook for exports to the world’s second-biggest economy.

The Bloomberg-JPMorgan Asia Dollar Index (ADXY) snapped a three- day drop as the People’s Bank of China set the reference rate 0.18 percent stronger. China is the largest overseas market for Thailand, South Korea and Taiwan. Thailand’s baht rebounded from a one-week low as foreign funds increased holdings of the nation’s assets after the central bank raised its economic growth estimate.

“If China’s policy is to boost domestic demand, ultimately the currency needs to appreciate,” said Nizam Idris, a Singapore-based strategist at Macquarie Group Ltd. “An appreciating currency boosts domestic purchasing power, which would be supportive of consumption.”

The ringgit gained 0.5 percent yesterday, the most in two weeks, to 3.0768 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. Thailand’s baht climbed 0.2 percent to 30.77 and Philippine’s peso rose 0.2 percent to 42.963.

The Bloomberg-JPMorgan Asia Dollar Index (ADXY) extended losses for the week to 0.5 percent. The gauge’s 60-day historical volatility rose to 3.50 percent from 3.45 percent last week.

‘A Surprise’

The yuan fell 0.1 percent yesterday and strengthened 0.2 percent this week to 6.3078 per dollar. The currency gained 0.17 percent in the last 30 minutes of trading on March 22, spurring speculation the monetary authority was buying the yuan.

“The fixing is such a surprise,” said Liu Dongliang, a senior analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The central bank is probably trying to remind the market appreciation isn’t over yet.”

The ringgit pared its weekly decline to 0.5 percent. Malaysia’s gross domestic product may rise 4 percent to 5 percent this year, Bank Negara Malaysia said on March 21, lower than a prediction of 5 percent to 6 percent the Finance Ministry made in October and an increase of 5.1 percent in 2011.

The baht fell 0.1 percent during the week. Global funds poured a net $834 million into local equities this month through March 22, according to exchange data. The Thai economy will expand 5.7 percent this year, compared with a previous estimate of 4.9 percent, central bank Assistant Governor Paiboon Kittisrikangwan said on March 21.

Philippine’s peso advanced after Finance Secretary Cesar Purisima said he is confident that a credit rating upgrade from Standard and Poor’s may come sooner than later, he said in a briefing in Manila yesterday.

Elsewhere, South Korea’s won fell 0.4 percent yesterday and 0.9 percent this week to 1,135.35 per dollar. Taiwan’s dollar was steady yesterday and lost 0.1 percent this week to NT$29.585. India’s rupee fell 2 percent this week through March 22 to 51.22. The nation’s currency markets were closed for a public holiday yesterday.

To contact the reporters on this story: Yudith Ho in Singapore at yho35@bloomberg.net.

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


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