Asian currencies gained this week for the first time since April on optimism stimulus measures in the world’s largest economies will support regional exports.
Policy makers in China cut their deposit rate by 25 basis points to 3.25 percent, while South Korea kept the seven-day repurchase rate unchanged at 3.25 percent yesterday. Philippine President Benigno Aquino said he expects better growth in the coming quarters, after the economy expanded at the fastest pace since 2010 last quarter. Asian currencies pared their weekly advance after Federal Reserve Chairman Ben S. Bernanke said fresh monetary stimulus will need further assessment.
“China has the scope to take more measures to cushion the economic slowdown,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “The outlook for Asian economies is still cloudy because the global situation, especially in Europe, is still one of muddling along.”
Malaysia’s ringgit led with a 0.8 percent weekly advance to 3.185 versus its U.S. counterpart as of 5:42 p.m. yesterday in Kuala Lumpur, according to data compiled by Bloomberg. The peso gained 0.3 percent to 43.27, and South Korea’s won rose 0.2 percent to 1,175.3. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, climbed 0.2 percent to 114.16 this week. The gauge declined in each of the past five weeks, the longest losing streak since 2008.
China’s borrowing-cost cut followed its plan to delay tightening capital-adequacy rules for banks to free up funds for lending. The People’s Bank of China said it may introduce the new requirement for lenders at the start of next year, having said in August it would begin this year. India pledged to reduce subsidies to support the currency and lure investors as the government seeks $1 trillion of investments by 2017 to build power plants, roads and bridges.
The MSCI Asia-Pacific Index (MXAP) of regional shares dropped 1.3 percent yesterday, halting a three-day advance and trimming its gain for the week to 0.1 percent, after Bernanke told lawmakers the central bank will assess economic conditions before deciding if a third round of so-called quantitative easing is needed.
“There are still jitters on the global front and at best the U.S. wants to keep the QE3 possibility vague for now,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. (MAY)
Overseas investors sold $550 million more shares than they bought in Indonesia, South Korea, Taiwan and Thailand this week, exchange data show.
“The market expects some bad data out of China and currencies of export-driven economies like Thailand will be affected,” Tanuwidjaja said.
The baht declined 0.5 percent to 31.71 per dollar, paring a weekly advance to 0.6 percent.
Elsewhere, Indonesia’s rupiah gained 0.6 percent this week to 9,473 per dollar, while Taiwan’s dollar slipped 0.2 percent to NT$29.976 and India’s rupee climbed 0.2 percent to 55.475. The Vietnamese dong fell 0.7 percent to 21,000.
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