Asian currencies gained this week as economic data from Taiwan to South Korea sparked optimism that regional growth is picking up, while in Jakarta, the rupiah fell after the Indonesian government said it would allow declines to spur exports.
The reports spurring the upward trend showed that Taiwan’s factory output growing more than estimated, while manufacturing in China rose at the fastest pace in seven months and South Korea’s current account surplus widened.
Global investors pumped more than US$5 billion this month into six Asian emerging stock markets tracked by Bloomberg this week.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, rose 0.15 percent over the past five days and 0.6 percent for the quarter.
In Taipei, the New Taiwan Dollar gained 0.3 percent to NT$29.962 this week, according to data compiled by Bloomberg.
A report on Monday showed that the nation’s industrial output last month rose 5.19 percent from a year earlier, exceeding economists’ median estimate for a 2.75 percent gain, while on Thursday, the central bank held a meeting at which it kept its key interest rate at 1.875 percent and expanded mortgage restrictions.
The central bank on Thursday said inflation expectations have risen as turbulence in the Middle East pushes up oil prices, while consumer price gains have exceeded 1.6 percent over the past three months after staying below 1 percent since May last year.
On Friday, local exporters rushed to dump the greenback in exchange for the NT dollar in preparation for the closing of their books at the end of the current quarter, dealers said.
Downward pressure on the US dollar was added at a time when the strength of the won encouraged traders to cut their greenback holdings, they added.
The losses suffered by the US dollar were capped after the central bank stepped in to prop up the currency and help it recoup most of its losses at the close, they said.
The central bank has sold the NT dollar in the runup to the close on most days since March 2012, according to traders who asked not to be identified. Currency appreciation reduces import costs, but hurts exports, which make up about 60 percent of the national economy.
Buying by local exporters is expected to continue today, the last business day of the quarter, which could lead the US dollar to further weakness, they said.
Foreign investors kept moving funds into the local bourse to buy a net in the market, which placed more selling in the US dollar throughout the session, dealers said.
Global funds have bought US$685 million more local equities than they sold this week, exchange data show, as US economic data that missed estimates increased bets that the US Federal Reserve will keep interest rates lower for longer.
“Since the Fed’s attitude hasn’t changed much, foreign funds will continue to flow into emerging markets,” said Forest Chen (陳秀宜), a Taipei-based economist at Ta Chong Bank Ltd (大眾銀行). “As international oil prices rise and inflation quickens, the central bank may let the [New] Taiwan dollar strengthen since a rate increase would be of no use in this case.”
The currency has gained 0.3 percent this month and 1.8 percent since March, with Chen predicting that it may rise to NT$29.6 in the third quarter amid sustained inflows.
“There have been massive inflows into Taiwan’s stock market. There’s some fundamental support for these North Asian currencies,” said Mirza Baig, BNP Paribas SA’s head of Asian currency and rates strategy. “The Korean won has done well and that’s a continuing story of current account surplus.”
The won has strengthened 0.7 percent since June 20 to 1,013.60 per US dollar, recording its biggest five-day advance in eight weeks and reaching 1,013.25 on Friday, the strongest level since August 2008.
South Korea’s current account surplus widened to US$9.3 billion last month from US$7.1 billion in April, Bank of Korea data showed yesterday. The nation attracted US$10.07 billion of foreign direct investment in the first half, up from US$8 billion a year earlier, a government report showed.
In Jakarta, the rupiah retreated 0.2 percent this week to 11,995 per US dollar and reached a four-month low of 12,110 on Firday, according to prices from local banks. Bank Indonesia has allowed the currency to become temporarily undervalued to increase competitiveness of exports while reducing imports, Senior Deputy Governor Mirza Adityaswara told reporters on Tuesday.
Southeast Asia’s largest economy had a trade deficit of US$1.96 billion in April, the biggest since last July, as exports dropped 3.16 percent, official figures showed this month. The central bank held its key interest rate at 7.5 percent on June 12 after data last month showed that urrent account shortfall narrowed to US$4.19 billion in the first quarter from US$4.31 billion the previous three
Elsewhere in Asia, the Malaysian ringgit rose 0.3 percent to 3.2135, India’s rupee climbed 0.2 percent this week to 60.0850 per dollar, the yuan strengthened 0.13 percent to 6.2181, the Philippine peso rose 0.1 percent to 43.753, Thailand’s baht was little changed at 32.471 and Vietnam’s dong slipped 0.1 percent to 21,330.
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