The Philippine peso led gains in Asian currencies this week on optimism central banks in the world’s biggest economies will boost efforts to arrest a global slump.
The People’s Bank of China and the European Central Bank lowered interest rates July 5 and the Bank of England expanded a bond-purchase program. The peso reached a four-year high as Standard & Poor’s upgraded the debt rating for the Philippines, while the yuan fell on speculation China will favor a weaker currency to support exports. The International Monetary Fund will cut its estimate for worldwide growth this year, Managing Director Christine Lagarde said yesterday.
“Developing nations are in an easing mode while this region’s economic condition is better than other areas,” said Kozo Hasegawa, a Bangkok-based trader at Sumitomo Mitsui Banking Corp. “So fund inflows into the region were supporting the currencies. There remain uncertain factors with Europe’s debt crisis lingering.”
The peso gained 0.9 percent from a week ago to 41.792 per dollar in Manila, according to Tullett Prebon Plc. South Korea’s won advanced 0.7 percent to 1,137.99 and Thailand’s baht rose 0.4 percent to 31.63, according to data compiled by Bloomberg. The rupee rose 0.3 percent to 55.4550. The yuan dropped 0.16 percent, the biggest five-day loss in a month, to 6.3644. Nine of the 11 most-traded Asian currencies declined yesterday.
Global funds pumped $461 million into the Indonesian, Philippine and South Korean stock markets this week through July 5, exchange data show.
China cut the one-year lending and deposit rates after two local manufacturing indexes fell last month. Services output shrank in June for a fifth month in the euro area, unexpectedly contracted in Germany and grew less than forecast in the U.K., reports showed this week. The U.S. Institute for Supply Management said July 5 its non-manufacturing index dropped to 52.1 in June, the lowest level since January 2010.
“The global growth outlook will be somewhat less than we anticipated just three months ago,” IMF’s Lagarde said in a speech in Tokyo, referring to an April estimate of 3.5 percent. “And even that lower projection will depend on the right policy actions being taken.” The new prediction is due to be announced in 10 days.
The rupee touched its strongest level since May as global funds bought $855 million more Indian stocks than they sold in the first three days of the week, set for the biggest weekly net purchases since the period ended on March 16, according to exchange data.
The peso completed a second weekly advance as the Philippines’s long-term foreign currency-denominated debt was upgraded one level to BB+ from BB by S&P this week. That’s one step below investment grade and the highest since 2003.
The won posted a sixth week of appreciation, the longest winning streak since October 2010, as overseas investors bought $182 million more Korean stocks than they sold in the last four days.
Samsung Electronics Co. (005930), South Korea’s biggest exporter, posted a record quarterly profit yesterday that beat analyst estimates as surging sales of Galaxy smartphones helped it challenge Apple Inc.’s iPhone. Operating profit totaled 6.7 trillion won ($5.9 billion) in the second quarter, a 79 percent jump from a year earlier, the company said.
“Foreign money keeps flowing into Korean stocks and this, coupled with demand from exporters, pushed the won higher this week,” said Lee Jung Hyun, a currency dealer at state-run Industrial Bank of Korea (024110) in Seoul. “The market’s reaction to China’s rate cut is muted with traders largely keeping a nervous eye on what’s going on in Europe.”
The yuan weakened 0.13 percent yesterday in Shanghai, according to the China Foreign Exchange Trade System. The PBOC lowered the reference rate by 0.09 percent to 6.3249. The currency is allowed to trade as much as 1 percent on either side of the daily fixing.
“The yuan’s outlook will be obviously even dimmer given the recognition of a softer domestic economy and a stronger dollar,” said Andy Ji, a Singapore-based strategist at Commonwealth Bank of Australia (CBA), the most-accurate forecaster of the Chinese currency in the past six quarters. Ji said in a separate interview this week that he’s currently reviewing forecasts for the yuan and will probably trim estimates as he expected the PBOC to curb gains.
Elsewhere, Indonesia’s rupiah rose 0.3 percent from a week ago to 9,405 per dollar, while Malaysia’s ringgit slid 0.3 percent to 3.1788. Taiwan’s dollar slid 0.1 percent to NT$29.922 and Vietnam’s dong was little changed at 20,880.
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