Sun, May 04, 2014 - Page 15 News List

US dollar falls as Fed signals continued low rates, Asian economies strengthen

Bloomberg

Asian currencies completed a weekly gain, led by the won’s advance to a five-year high, as data signaled a continued recovery in the region’s economies and on bets US borrowing costs would remain low.

Taiwan’s GDP growth beat forecasts, South Korea reported its largest current-account surplus in five months and China’s manufacturing rose last month, data showed this week.

The US Federal Reserve said on Wednesday it is likely to keep the benchmark US interest rate close to zero for a “considerable time” after its stimulus program ends, and a separate report showed the world’s largest economy barely expanded last quarter.

“The market’s in a bit of a sweet spot where the data’s good, but not good enough to really elicit an aggressive move higher in US interest rates,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp in Singapore. “Better data has been a secondary factor, although that’s probably played out more for markets like South Korea.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.2 percent from April 25 to 115.35 on Friday.

NT FINDS SUPPORT

The New Taiwan dollar completed its first weekly advance in three on speculation economic growth and rallying equities would attract more capital.

Taiwan’s economy expanded 3.04 percent in the first quarter from a year earlier, official data showed this week, compared with the 3 percent median forecast in a Bloomberg survey. Global funds boosted holdings of the Taiwanese stocks by US$3.1 billion this quarter, exchange data show, while the benchmark equity index climbed to its highest level in almost three years on April 23.

The NT dollar “has been supported by a healthy external position, but the price action has been limited,” said Frances Cheung, head of Asian rates strategy at Credit Agricole CIB in Hong Kong.

The currency rose 0.4 percent this week to NT$30.212 against its US counterpart, and was up 0.2 percent from Wednesday, according to prices from Taipei Forex Inc.

Most Asian markets were shut on Thursday for May Day or International Workers’ Day.

South Korea’s won climbed 1.1 percent this week to 1,030.33 per US dollar, data compiled by Bloomberg showed. It rose to 1029.96 on Wednesday, the strongest level since August 2008, after Seoul’s current-account surplus reached US$7.35 billion in March.

The yuan fell 0.1 percent from April 25 to 6.2593 on Wednesday. China’s purchasing managers index (PMI) for manufacturing was 50.4 last month, compared with a reading of 50.3 in March and the 50.5 median estimate of analysts in a Bloomberg survey, a report on Thursday showed.

“We’ve had slightly better data out of Asia,” said Callum Henderson, Standard Chartered PLC’s global head of foreign-exchange research in Singapore. “The China manufacturing PMI was better month-on-month albeit modestly. Clearly talk of a hard landing is overdone.”

Elsewhere in Asia, the Philippine peso rose 0.3 percent this week to 44.515 per US dollar. India’s rupee gained 0.8 percent to 60.1625. Indonesia’s rupiah strengthened 0.4 percent to 11,523, Malaysia’s ringgit gained 0.1 percent to 3.2657 and Vietnam’s dong advanced 0.08 percent to 21,083. Thailand’s baht was the only decliner, dropping 0.5 percent to 32.403.

MAJOR CURRENCIES

The US dollar also weakened against most major peers as traders bet data showing mixed employment growth may keep the Fed from accelerating interest-rate increases as the economy emerges from a first-quarter slowdown.

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