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Goldman Sachs predicts stronger Asian currencies

Goldman Sachs Group Inc, the world's largest securities firm by market value, raised its three-month forecasts on six Asian currencies as signs of accelerating inflation and growth change the policies of central banks.

"There is evidence that foreign-exchange intervention strategies are changing across the region," Goldman analysts Fiona Lake, Jens Nordvig and Thomas Stolper wrote in a note on Thursday.

"In an environment of rising inflation risk, a stronger currency may be a very powerful policy tool," they wrote.

India's rupee will climb to 39.50 against the US dollar, up from a previous forecast of 41.30. The Malaysian ringgit will rise to 3.33, up from the prior prediction of 3.41. The Philippine peso will advance to 43.50 from a projection of 45.50.

Singapore's dollar will gain to S$1.45 compared with the old forecast of S$1.51 and the New Taiwan dollar will strengthen to NT$32.00 from a prior estimate of NT$32.50. The Thai baht will appreciate to 32.00 from 35.00.

Inflation quickened to a two-year high of 3.08 percent in Taiwan last month and a 12-year high of 2.9 percent in Singapore.

The Philippine economy expanded 7.5 percent in the three months to June 30, the fastest pace in two decades.

India's economic growth accelerated to 9.3 percent in the second quarter, the most in almost a year.

Morgan Stanley & Co, the second-biggest US securities firm, also raised its forecasts on six Asian currencies as inflation and surging investments place pressure on central banks to let exchange rates appreciate.

Morgan Stanley raised forecasts for the yuan, the Korean won, the ringgit, the baht and the Singapore and NT dollars.

Fourteen of 17 currencies of Asia's largest economies appreciated against the US dollar in the past year, with India's rupee having the third-best performance at 16 percent, behind the Australian and New Zealand dollars.

"We have seen evidence of bigger foreign-exchange moves in a number of Asian countries," the Goldman analysts wrote. "The relatively moderate increases in reserves in Korea, Singapore and Taiwan in recent months point to a less aggressive intervention stance."

South Korea's foreign-exchange reserves rose 0.8 percent to US$257.3 billion last month from August, according to the Bank of Korea.

Goldman estimated the total intervention by the Bank of Korea, the Monetary Authority of Singapore and Taiwan's central bank and compared that estimate with the average monthly appreciation in the won and in the Singapore and NT dollars.
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