Asian currencies post fourth straight rise

Bloomberg and CNA

Sun, May 05, 2013 - Page 15

Asian currencies rose for a fourth week, the longest winning streak in seven months, on speculation central banks will provide more policy stimulus.

South Korea’s won reached a seven-week high on Friday and India’s rupee touched a two-month high on Thursday, helping drive a 0.3 percent weekly gain in the Bloomberg-JPMorgan Asia Dollar Index. The MSCI All Country World Index of shares advanced for a second week.

The European Central Bank (ECB) reduced its benchmark interest rate this week, while the US Federal Reserve said it would maintain its US$85 billion monthly bond-purchase program.

“The rally is driven by liquidity and expectations that policymakers will cap the downside,” ABN Amro Bank NV currency strategist Roy Teo said in Singapore.

The won strengthened 1.3 percent this week to 1,097.20 per US dollar yesterday, data compiled by Bloomberg show. The Philippine peso rose 0.8 percent to 40.903 and the Indian rupee climbed 0.7 percent to 53.9775.

The New Taiwan dollar rose 0.3 percent this week, after the US dollar fell against the local currency on Friday, shedding NT$0.026 to close at NT$29.610 as foreign institutional buying in the local bourse placed downward pressure on the greenback, dealers said.

The losses suffered by the US dollar were offset partially by the intervention of the central bank, which has tried to keep the NT dollar cheaper and lift the country’s global competitiveness amid a regional currency war, they said.

However, a weakening Chinese yuan let some air out of the NT dollar after the People’s Bank of China lowered its reference rate.

Reports this week showed manufacturing growth slowed last month in China, India and the US, while Taiwan’s first-quarter growth trailed estimates. The Bank of Japan on April 4 said it would buy ¥7.5 trillion (US$76 billion) of debt per month to stimulate its economy.

In South Korea, three of seven Central Bank of Korea board members favored reducing the seven-day repurchase rate at last month’s policy meeting, according to minutes released on April 30.

The Reserve Bank of India cut its repurchase rate to 7.25 percent from 7.5 percent yesterday, a move predicted by 33 of 40 economists in a Bloomberg survey.

The Philippine peso touched a three-week high yesterday after Standard & Poor’s lifted the nation’s debt rating to investment grade on Thursday.

The company lowered its outlook on Indonesia’s rating to “stable” from “positive,” citing stalling reforms. The rupiah fell 0.2 percent in the week to 9,741 per US dollar.

Thailand’s baht was the biggest loser this week, dropping 1.2 percent to 29.60 per US dollar on concern the authorities may intervene to stem gains.

Elsewhere, Malaysia’s ringgit was little changed at 3.0335 per US dollar this week before general elections today, while China’s yuan gained 0.15 percent to 6.1556, with local markets closed from April 29 through Wednesday for public holidays and Vietnam’s dong was steady at 20,940.

The US dollar declined versus the euro for the first time in three weeks following the data on US manufacturing and the Fed’s statements.

The greenback weakened on Friday even after US Department of Labor data showed US payrolls expanded by 165,000 workers last month following a revised 138,000 increase in March that was larger than first estimated.

The US unemployment rate dropped to 7.5 percent, the lowest level since December 2008, from 7.6 percent in March.

“Non-farm [payrolls] was strong, but not strong enough to bring in expectations of QE tapering,” Bank of Nova Scotia’s Camilla Sutton said on Friday.

The South African rand was the biggest winner this week among the US dollar’s 16 most-traded counterparts tracked by Bloomberg, rallying 2.2 percent. The yen was the biggest loser and South Korea’s won was the second-best performer, with a gain of 1.4 percent.

The yen declined beyond ¥99 to the US dollar for the first time in a week as investors left the safety of Japan’s currency while seeking higher-returning assets.

The US currency weakened 0.6 percent to US$1.3114 per euro this week in New York. It was the biggest drop since the five days ended on April 12. Japan’s currency fell 1.7 percent to ¥129.84 per euro.

The pound strengthened for a second week against the US dollar as economic reports that exceeded analyst estimates boosted confidence that growth is accelerating.

Sterling climbed to an 11-week high versus the greenback as reports from UK business confidence to manufacturing, construction and services output beat forecasts.

The pound advanced 0.6 percent in the week to US$1.5566 on Friday after touching US$1.5606 on Wednesday, the most since Feb. 13. Sterling was little changed at £84.25 pence per euro.