Bloomberg News

Asian Currencies Strengthen on U.S., China Stimulus Speculation

July 19, 2012

Asian currencies advanced on speculation policy makers from the U.S. to China will increase economic stimulus measures to support growth, spurring demand for the region’s exports and financial assets.

Malaysia’s ringgit reached a two-week high and South Korea’s won rose for a fifth day, its longest rally in a month, after data showed U.S. housing starts gained 6.9 percent in June to the highest level since 2008. The Federal Reserve is prepared to “take further action as appropriate” and has the capacity to make more bond purchases, Chairman Ben S. Bernanke said in his Congress testimony yesterday. Asian economies may need to ease further as Europe’s debt crisis damps growth, the Asian Development Bank said today.

“The market is hoping that some stimulus measures from the U.S. and China are on the table,” said Irene Cheung, a Singapore-based currency strategist at Australia & New Zealand Banking Group. “This will be supportive of risk assets.”

The ringgit strengthened 0.3 percent to a two-week high of 3.1530 per dollar as of 4:20 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The won closed 0.3 percent higher at 1,139.15, India’s rupee advanced 0.3 percent to 55.302 and Thailand’s baht climbed 0.1 percent to 31.68.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s currencies, rose for a fifth day while its 60-day historical volatility was steady at 3.68 percent. The MSCI Asia Pacific Index of equities advanced 1.6 percent, the biggest daily gain this month.

Hyundai Stake Sale

Korea’s currency advanced after investors bought $129 million of local shares more than they sold this week through yesterday. Hyundai Heavy Industries Co., the world’s largest shipbuilder, sold a 705 billion won ($617 million) stake in Hyundai Motor Co., boosting the prospect of fund inflows.

The stake sale “will support the won,” said Byeon Ji Young, a Seoul-based currency analyst for Woori Futures Co.

China’s yuan was little changed at 6.3700 per dollar in Shanghai versus 6.3702 yesterday. The People’s Bank of China set the currency’s daily reference rate at 6.3126, or 0.02 percent stronger than yesterday.

China has “relatively large” room to boost fiscal spending to spur growth, Zhang Peng, a researcher with the Fiscal Research Institute at the Ministry of Finance in Beijing, said in an interview yesterday. China needs to adopt a “moderately easing” policy when growth is below 8 percent, the Shanghai Securities News reported today, citing Fan Jianping, chief economist at the State Information Center.

‘Reviving Growth’

The world’s second-largest economy expanded 7.6 percent last quarter from a year earlier, the slowest pace in more than three years, according to the latest government data.

“Given reviving growth is a priority, China has to implement policies that encourage investment, which could spur some demand for the yuan,” said Daniel Chan, executive vice- president at Glory Sky Global Markets Ltd. in Hong Kong. “Yet, the yuan won’t appreciate much because the government also wants to safeguard export growth.”

Elsewhere, the Philippine peso slid 0.2 percent to 41.743, reversing an earlier gain of as much as 0.2 percent. Indonesia’s rupiah was steady at 9,479, Taiwan’s dollar gained 0.1 percent to NT$29.984 and the Vietnamese dong was little changed at 20,850.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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