Bloomberg News

Asian Currencies Rise as Europe Optimism Encourages Risk-Taking

October 17, 2012

Asian currencies advanced, led by Malaysia’s ringgit, as optimism Spain is moving closer to receiving a bailout supported demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index rose to the highest level since Feb. 29 after two senior German coalition lawmakers said yesterday the nation is open to Spain seeking a precautionary credit line from the region’s rescue fund. European Union leaders hold a summit in Brussels starting tomorrow. The region is the second-largest export market for China this year. Faster-than-forecast U.S. industrial production growth also encouraged investors to buy Asian assets.

“Speculation about Spain seeking assistance is easing risk aversion in the market, supporting stocks and regional currencies,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “The improved sentiment may prevail in the short term.”

The ringgit climbed 0.5 percent to 3.0355 per dollar as of 4:35 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Indonesia’s rupiah and the Philippine peso added 0.4 percent to 9,576 and 41.175, respectively. The Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, rose 0.1 percent to 117.83.

Presidential Election

China’s yuan strengthened to the strongest level in 19 years after the central bank bolstered the currency’s reference rate as U.S. holds the second presidential debate. The currency advanced 0.15 percent to 6.2545 in Shanghai, according to China Foreign Exchange Trade System.

The People’s Bank of China raised the fixing today by 0.12 percent to 6.3028 per dollar, the strongest since June 20. The U.S. presidential election and U.S. Deputy Secretary of State William Burns’ visit to China have contributed to the recent yuan appreciation, the central bank’s publication Financial News said in a commentary today. The yuan has advanced 2.3 percent since reaching this year’s low of 6.3967 on July 25. The Chinese Communist Party will hold a congress starting Nov. 8 that may feature a once-a-decade leadership transition.

“China wants to ease the heat on yuan’s exchange rate as the U.S. presidential elections are looming,” said Banny Lam, a Hong Kong-based chief economist at CCB International Securities Ltd., a unit of China’s second-largest bank. “There are also bets that China will step up stimulus after the congress. Yet the yuan could soften when these factors fade.”

U.S. Data

South Korea’s won strengthened to an almost one-year high. The Dollar Index traded on ICE Futures in New York, which compares the currency with those of six trading partners, fell for a second day after data showed U.S. industrial output expanded 0.4 percent last month, beating the 0.2 percent gain forecast in a Bloomberg survey.

The Kospi index of shares rose following the biggest advance in a month in the Standard & Poor’s 500 Index.

“With the U.S. stock moves positive and a weakening of the greenback, the won will face appreciation pressure again,” said Lee Jin Ill, a Seoul-based currency trader for Hana Bank. “Still, there is caution the government may intervene to smooth currency gains, so steep appreciations may be limited.”

Malaysia’s ringgit climbed to a one-month high after gains in U.S. production signaled a recovery in the world’s biggest economy is gaining traction, brightening outlook for the Southeast Asian nation’s exports.

“Sentiment is looking up a little bit more after the U.S. data,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia. (CBA)

Elsewhere, the Thai baht rose 0.2 percent to 30.63 per dollar, the Taiwan dollar appreciated 0.2 percent to NT$29.246 and the Indian rupee was little changed at 52.9025, according to data compiled by Bloomberg.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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