Sun, Jun 15, 2014 - Page 15 News List

Asian currencies advance as China allows yuan rise

Bloomberg

Asian currencies advanced for a second week amid signs China would allow the yuan to resume appreciation and on optimism monetary easing in Europe would spur fund flows into higher-yielding assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.1 percent in the past five days after the European Central Bank (ECB) cut its deposit rate last week to minus-0.1 percent.

The yuan had its best five-day gain since 2011, as the People’s Bank of China boosted its reference rate by 0.19 percent since June 6, the most since December, to 6.1503 per US dollar.

“When the ECB started the ball rolling with negative rates, that accentuated the search for carry and that has brought some of the flows into Asia,” said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore. “China has started appreciating its currency after a prolonged period where the yuan was depreciating.”

The yuan rose 0.6 percent from June 6 to 6.2107 per US dollar on Friday in Shanghai, according to China Foreign Exchange Trade System prices. The New Taiwan dollar rose 0.1 percent from a week ago to NT$30.053, Indonesia’s rupiah climbed 0.3 percent to 11,795, Thailand’s baht advanced 0.2 percent to 32.415 and South Korea’s won strengthened 0.3 percent to 1,017.88.

Overseas investors pumped a net US$995.3 million into stock markets in Taiwan, India and South Korea this week, data compiled by Bloomberg show. They added US$1.21 billion to holdings of bonds in India and Thailand.

The yuan touched a two-month high of 6.2018 per US dollar on Friday on speculation the central bank would tolerate gains after the nation’s trade surplus widened. The US-China Strategic and Economic Dialogue will be held in Beijing early next month.

Chinese exports climbed 7 percent from a year earlier last month, official data showed on June 8, compared with growth of 0.9 percent in the previous month and the median estimate of a 6.7 percent gain in a Bloomberg survey. That left a trade surplus of US$35.9 billion, almost double the figure for April, as imports unexpectedly fell 1.6 percent.

“Our view is that better economic data and international diplomacy are at play here,” Bank of America Merrill Lynch strategists wrote in a research note on Friday.

Elsewhere in Asia, Malaysia’s ringgit fell 0.2 percent to 3.2185, the Philippine peso dropped 0.3 percent to 43.78 and the Indian rupee weakened 1 percent to 59.7725.

YEN, EURO

The yen rose the most in three months against the euro, as the Bank of Japan (BOJ) refrained from expanding monetary stimulus a week after the European Central Bank (ECB) cut interest rates.

Japan’s currency reached a four-month high versus the 18-nation euro as the central bank maintained plans to increase the monetary base at a pace of ¥60 trillion (US$588 billion) to ¥70 trillion per year, in line with estimates of all 33 economists in a Bloomberg News survey.

Sterling rose to the highest since November 2012 against the shared currency after Bank of England Governor Mark Carney said interest-rate increases may be sooner than expected.

The US dollar was little changed against a basket of major peers before the US Federal Reserve meets on Tuesday and Wednesday to consider plans to reduce stimulus.

The yen strengthened 1.2 percent to 138.17 per euro this week in New York, the biggest gain since March 14. The Japanese currency rose 0.4 percent to 102.04 versus the US dollar, while the single currency fell 0.8 percent to US$1.3540.

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