Asian currencies strengthened, led by India’s rupee, on speculation central banks in the world’s biggest economies will ease monetary policies to spur growth.
The rupee advanced for a fourth day, its longest winning streak in five months, and the Bloomberg-JPMorgan Asia Dollar Index was headed for its highest close in seven weeks. The European Central Bank will cut its benchmark interest rate at a July 5 meeting, according to 51 of 62 forecasts in a Bloomberg survey. Speculation the Federal Reserve will act was boosted by data yesterday that showed U.S. manufacturing shrank for the first time since July 2009. China should cut banks’ reserve- requirement ratios, the state-run China Securities Journal said today in a front-page commentary.
“Expectations that the ECB may act to boost the economy are supporting the won,” said Byeon Ji Young, a currency analyst at Woori Futures Co. in Seoul. “The weak U.S. manufacturing data isn’t weighing on sentiment that much as it also raises speculation about the Federal Reserve’s policies.”
The rupee gained 1.4 percent to 54.6888 per dollar as of 2:21 p.m in Mumbai, earlier touching a six-week high of 54.665, according to data compiled by Bloomberg. South Korea’s won rose 0.7 percent to 1,138.29, the Philippine peso strengthened 0.7 percent to 41.725 and Thailand’s baht advanced 0.4 percent to 31.48. The Asia Dollar Index climbed 0.3 percent.
The Institute for Supply Management’s index of U.S. manufacturing fell to 49.7, worse than the most-pessimistic forecast in a Bloomberg survey, from 53.5 in May. Figures below 50 signal contraction. In China, gauges tracking factory output dropped to seven-month lows as overseas orders fell.
“The world economy has stumbled, with trade especially weakening into June and local production held back by high inventories,” Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc wrote in a note to clients today. Monetary stimulus is needed while there’s lots more China can do “to ratchet things up,” the report said.
China’s yuan declined 0.06 percent to 6.3523 per dollar in Shanghai. The central bank weakened its fixing rate by 0.05 percent to 6.3178. Trade figures next week are forecast to show export growth slowed to 10.1 percent in June from 15.3 percent in May, based on the median estimate in a Bloomberg survey.
“China is likely to hold yuan appreciation to help exports as it hopes to safeguard economic growth,” said Stella Lee, president of Success Futures & Foreign Exchange Ltd. in Hong Kong.
Elsewhere, Malaysia’s ringgit gained 0.4 percent to 3.1489 per dollar and Indonesia’s rupiah climbed 0.1 percent to 9,375. Taiwan’s dollar gained 0.1 percent to NT$29.886 and the Vietnamese dong was little changed at 20,890.
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