Bloomberg News

Asian Currencies Gain, Led by Ringgit, on Europe Debt Optimism

September 04, 2012

Asian currencies rose, led by Malaysia’s ringgit, on speculation the European Central Bank will announce details of its new bond-buying plan this week, bolstering demand for riskier assets.

The ringgit and Thailand’s baht gained for a third day after ECB President Mario Draghi told lawmakers in Brussels yesterday that purchasing short-dated securities doesn’t constitute state financing, according to Jean-Paul Gauzes, a member of the European Parliament. Chancellor Angela Merkel said yesterday Germany must show solidarity with Europe in tackling the region’s debt crisis.

“The market continues to be supported by the overnight positive development out of the euro zone,” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale in Hong Kong. “We expect Asian currencies to stay a little stronger versus the U.S. dollar.”

The ringgit strengthened 0.3 percent to 3.1075 against the greenback as of 4:50 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The baht rose 0.1 percent to 31.19, the Philippine peso advanced 0.2 percent to 41.903 and Taiwan’s dollar appreciated 0.1 percent to NT$29.902. The Bloomberg- JPMorgan Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, touched 115.73, the highest level since Aug. 9.

Stabilize Markets

Draghi may give more details on the ECB’s bond-buying plans when he holds his first press conference on Sept. 6 following the summer break.

Thailand’s baht climbed to its strongest level since May after global funds bought $27 million more local shares than they sold yesterday, snapping a seven-day run of net sales, exchange data show.

“There is growing speculation the ECB will announce details after its policy meeting on Sept. 6, a move that will probably help stabilize financial markets,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “That improves risk sentiment and is positive for Asian assets. Regional currencies will remain solid this week.”

The baht touched 31.15 earlier, matching an Aug. 24 level that was the strongest since May 11.

The Bank of Thailand may keep its benchmark interest rate unchanged at 3 percent tomorrow, according to 18 of 21 economists surveyed by Bloomberg. Three predicted a quarter of a percentage point reduction. Inflation slowed to 2.69 percent in August from 2.73 percent the previous month, official data showed yesterday.

“The market is mainly moving on risk sentiment and inflation and policy-rate outlooks have less impact at this moment,” Japan Center for Economic Research’s Hayashi said.

Taiwan Inflation

The Taiwanese currency gained for a third day before official data tomorrow that may show consumer prices rose 2.6 percent in August from a year earlier, the fastest pace since 2008, according to the median estimate of economists in a Bloomberg survey. Typhoon Tembin caused at least NT$72.9 million ($2.4 million) worth of agricultural damage on the island in August as the storm affected farming facilities and crops.

“The market is hoping for the ECB bond-buying plan to materialize,” said Ma Tieying, an economist at DBS Group Holdings Ltd. in Singapore. “Consumer prices should remain high in the third quarter due to the typhoon season. But the central bank might want to keep the currency stable to balance a weakening economy.”

Elsewhere in Asia, China’s yuan fell 0.1 percent to 6.3473 per dollar, South Korea’s won slipped 0.2 percent to 1,133.19, while Indonesia’s rupiah dropped 0.2 percent to 9,584. India’s rupee declined 0.1 percent 55.5750

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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