Bloomberg News

Asian Currencies Advance in Week as Slowdown Fuels Stimulus Bets

July 20, 2012

Asian currencies had a second weekly advance on speculation the U.S. and China will adjust policies to revive the world’s two biggest economies, boosting demand for riskier assets.

Malaysia’s ringgit gained the most since January and South Korea’s won reached a two-week high after Federal Reserve Chairman Ben S. Bernanke said on July 17 that policy makers are studying options for further stimulus measures. Premier Wen Jiabao said the government needs to assess the situation in China’s economy, which grew at the slowest pace since 2009 last quarter, Xinhua News Agency reported on July 15.

“Investor sentiment is still being driven by prospects of fresh quantitative easing in the U.S.,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. (WBC) in Singapore. “This is benefiting high-yielding assets.”

The ringgit rallied 1.1 percent to 3.1513 per dollar as of 4:28 p.m. in Kuala Lumpur, snapping a two-week drop, according to data compiled by Bloomberg. The won rose 0.8 percent to 1,141.20, the Philippine peso gained 0.3 percent to 41.865 and Taiwan’s dollar strengthened 0.1 percent to NT$29.995.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s currencies, added 0.2 percent while its 60-day historical volatility dropped to 3.66 percent from 3.72 percent a week ago. The MSCI Asia Pacific Index of equities climbed 1.3 percent for the week.

Signs of Slowdown

Reports this week showed sales of existing homes and consumer spending in the U.S. unexpectedly dropped in June, while U.K. retail sales rose less than economists predicted. The International Monetary Fund cut its global growth forecast for 2013 on July 16 to 3.9 percent from a 4.1 percent estimate in April. The Dollar Index, which tracks the greenback against the currencies of six major trade partners, fell 0.5 percent from July 13.

China’s yuan gained 0.1 percent to 6.3740 per dollar in Shanghai. The People’s Bank of China set the currency’s daily reference rate at 6.3112 today, the strongest level since June 21. Premier Wen said this week the economy is yet to stabilize and reiterated the need for policy adjustments in the coming months to spur growth.

“People are expecting Premier Wen will announce something more significant than what he has done and the foreign-exchange market is getting firmer,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore. “The risk-on environment also helps with no particular news from Europe.”

The central bank has lowered its benchmark interest rates twice in the past two months, while trimming banks’ reserve- requirement ratio three times since November. Nomura Holdings Inc. said the State Council may detail more stimulus measures this week.

Elsewhere, Indonesia’s rupiah fell 0.2 percent this week to 9,465 per dollar, Thailand’s baht was steady at 31.67 and India’s rupee was little changed at 55.1525. The Vietnamese dong rose 0.1 percent to 20,850.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net.

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


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