Asian currencies advanced this week, led by South Korea’s won and the Philippine peso, on optimism faster growth in emerging markets will spur global investors to add to holdings of regional assets.
Overseas investors pumped a combined US$1.4 billion into equities in Indonesia, the Philippines and Taiwan this week, according to exchange data. Asia’s developing economies will expand 8.4 percent this year and next, more than triple the 2.5 percent annual growth of industrialized nations, the IMF estimated on Tuesday.
“Asian currencies have strong links to fund inflows into their stocks,” said Minoru Shioiri, chief manager of Mitsubishi UFJ Morgan Stanley Securities Co in Tokyo.
“The global stock markets have been pretty solid recently, supporting sentiment for investors’ risk appetite, which is good for Asian currencies,” Shioiri added.
TAIWAN
The New Taiwan dollar completed the longest run of weekly gains since March 2008 before the government reports the economy expanded for a fifth quarter.
The economy expanded 6 percent in the last three months of last year after having grown 9.8 percent in the previous quarter, according to the median estimate of economists in a Bloomberg survey before data due tomorrow.
The currency gained as much as 1.1 percent to NT$29, the strongest level since October 1997, and pared gains in the final minutes of trading after the monetary authority stepped in, according to two traders who declined to be identified.
“The GDP figure will show Taiwan’s economy remains strong,” said Tarsicio Tong (湯健揚), a Taipei-based currency trader at the Union Bank of Taiwan (聯邦銀行). “I think the [New] Taiwan dollar has already risen a lot, even though the market is still very bullish.”
The NT dollar closed 0.5 percent stronger this week and 0.1 percent on Friday at NT$29.280 against its US counterpart, according to Taipei Forex Inc.
The government’s benchmark five-year bonds were little changed on the last trading day before the Lunar New Year holiday. The yield on the 1 percent note due January 2016 was 1.054 percent, compared with 1.058 percent on Thursday, according to the GRETAI Securities Market. The rate rose one basis point this week.
A basis point is 0.01 percentage point.
The South Korean won advanced 0.9 percent this week to 1,113.83 per dollar, according to data compiled by Bloomberg. The Philippine peso rose 0.9 percent to 44.103 and Singapore’s dollar gained 0.3 percent to S$1.2813.
The won rose to a one-week high yesterday after the Bank of Korea said on Thursday the nation’s current-account surplus widened to US$2.11 billion last month from a revised US$1.93 billion the previous month.
The peso rose, snapping three weekly declines. The Philippine economy probably expanded 6 percent in the fourth quarter from a year earlier after having grown 6.5 percent in the previous three months, according to a Bloomberg survey before government data due tomorrow. GDP rose 7 percent last year, which would be the fastest pace since 2007, according to the poll.
Elsewhere, Indonesia’s rupiah gained 0.3 percent to 9,033 per US dollar, Malaysia’s ringgit rose 0.2 percent to 3.0550 and China’s yuan was little changed at 6.5861. Thailand’s baht fell 1.3 percent to 31.09 and India’s rupee dropped 0.3 percent to 45.7562.
The yen gained versus most of its major counterparts as Egyptian political turmoil spurred demand for the currency’s safety even after S&P lowered Japan’s credit rating.
As Egyptian President Hosni Mubarak faced the biggest challenge to his 30-year rule, Egypt’s pound fell to a six-year low versus the US dollar as Fitch Ratings revised the nation’s outlook to negative. The greenback erased its loss against the euro before next week’s US payrolls report, forecast to show gains.
“I don’t think when we said the fallout from the downgrade would be temporary we were thinking it would be six hours,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. “We have risk aversion that is affecting the market, and it is dragging down global yields. The yen always gains when global yields go lower.”
The yen appreciated 0.6 percent to ￥111.77 per euro on Friday, from ￥112.48 at the end of last week. The yen advanced 0.5 percent to ￥82.12 versus the US dollar, from ￥82.57. The greenback was little changed at US$1.3611 per euro, from US$1.3621.
The yen dropped to a two-month low against the euro on Thursday, when Japan’s credit rating was lowered to “AA-.”
Sterling had its biggest weekly drop in more than a month, declining 0.9 percent to US$1.5860.
Egypt’s pound slid 0.9 percent to 5.8575 after touching 5.8584, the weakest level since January 2005.
South Africa’s rand was the biggest loser versus the dollar as gold tumbled before rallying on Egyptian turmoil. The rand depreciated 1.8 percent to 7.1800.
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