Bloomberg News

Asian Currencies Advance as Fed Policy Outlook May Boost Inflows

March 27, 2012

Asian currencies advanced for a third day after the Federal Reserve signaled it will keep U.S. interest rates near zero, helping drive demand for higher- yielding assets.

The Bloomberg-JP Morgan Asia Dollar Index headed for the best quarter since 2010 as regional stocks rebounded from a two- week low. Fed Chairman Ben S. Bernanke said yesterday that continued monetary stimulus will be needed to bolster employment in the world’s largest economy. German Chancellor Angela Merkel said yesterday that she may back plans for Europe’s temporary and permanent rescue funds to run in parallel.

“Bernanke’s comments suggest U.S. interest rates won’t rise for a while,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team in Tokyo at Mizuho Corporate Bank Ltd. “Merkel’s comments helped to improve risk sentiment. Fund inflows to the region will continue.”

South Korea’s won rallied 0.7 percent to close at 1,134.20 per dollar in Seoul, according to data compiled by Bloomberg. Malaysia’s ringgit strengthened 0.5 percent to 3.0585, India’s rupee appreciated 0.9 percent to 50.79 and the Philippine peso climbed 0.3 percent to 42.92.

The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, has climbed 1.4 percent this year. Foreign investors bought $25.5 billion more stocks than they sold in India, South Korea, Taiwan and Thailand this year, based on data compiled by stock exchanges.

Korean Confidence

Reducing the U.S. jobless rate further will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies,” Bernanke said. Policy makers at the Fed said after a Jan. 25 policy meeting that they saw “exceptionally low” interest rates through 2014. The target rate has remained between zero and 0.25 percent since December 2008.

Munich-based Ifo institute said yesterday its German business climate index improved to 109.8 this month from a revised 109.7 in February.

The won snapped a five-day decline after a Bank of Korea report showed consumer confidence rose to a four-month high as the U.S. economy improved and Europe’s debt crisis waned.

Thai Forecasts

Thailand’s baht gained 0.2 percent to 30.71 per dollar, poised for its biggest gain since March 8. The finance ministry raised its 2012 growth estimate and predicted interest rates will rise. Gross domestic product may expand between 5 percent and 6 percent, Somchai Sujjapongse, head of the fiscal policy office, said in Bangkok yesterday. The government forecast a 5 percent growth earlier.

“The baht should benefit from last night’s comments from the finance ministry that they expect a rate hike this year,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.

China’s yuan climbed 0.11 percent to 6.3072 per dollar in Shanghai, according to China Foreign Exchange Trade System. The People’s Bank of China fixed its reference rate at 6.2840, the strongest on record.

Elsewhere, Indonesia’s rupiah strengthened 0.3 percent to 9,168 versus the greenback and the Taiwan dollar gained 0.1 percent to NT$29.584.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.

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


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