Asian Currencies Rise, Led by Won, on Recovery, Stock Buying

Sept. 26 (Bloomberg) -- South Korea’s won led gains in Asian currencies this week as increasing confidence the economy is recovering from a recession helped lure funds from overseas.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, was near the highest level in 11 months after the Asian Development Bank raised its economic growth forecasts for this year and next. The Thai baht and Indonesian rupiah fell yesterday on speculation leaders from the Group of 20 nations will tighten controls on global banks, curbing demand for assets in developing markets.

“The won will be one of the better-performing currencies in Asia over the next six months,” said Patrick Bennett, a Hong Kong-based foreign-exchange strategist at Societe Generale SA. “We’re still in the process of investors rebuilding positions in Asian equities, which will drive the currencies to stronger levels.”

The won rose 1.8 percent this week to 1,186.00 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso appreciated 0.7 percent to 47.320, according to Tullett Prebon Plc. The Indian rupee gained 0.2 percent to 47.995 in Mumbai.

Korea’s won had a fifth weekly gain, its longest winning streak since April, and the peso climbed for a fourth week, its best run this year. Consumer sentiment in Korea stayed at a seven-year high this month, according to a report published by the nation’s central bank yesterday.

Stock Inflows

Asia, excluding Japan, will expand 3.9 percent in 2009, faster than a March estimate of 3.4 percent, the Manila-based ADB said in a report on Sept. 22. Growth may accelerate in 2010 to 6.4 percent, it said.

Emerging-market stock funds investing in Asia excluding Japan attracted $427 million during the week ended Sept. 23, EPFR Global, a Cambridge, Massachusetts-based research firm, said in an e-mailed statement on Sept. 24.

Asian currencies mostly retreated yesterday after Federal Reserve Governor Kevin Warsh signaled the central bank may start to raise interest rates before indicators suggest it needs to.

Thailand’s baht dropped 0.2 percent yesterday and the Singapore dollar declined 0.3 percent. The MSCI Asia-Pacific Index of regional shares lost 0.7 percent.

‘Short Squeeze’

“When you have a major central bank harking about changing their accommodative policy stance, it’s causing a short squeeze on the market,” said Alan Cayetano, a senior currency trader at Metropolitan Bank & Trust Co. in Manila. “People are selling commodities and equities and buying back the dollar.”

The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, rose 1.1 percent on Sept. 24, the biggest gain since Aug. 7. It was little changed yesterday.

The yen advanced against the euro this week on speculation Japanese exporters repatriated profits before the fiscal first half ends this month. Japan’s currency climbed to 131.70 yen per euro in New York from 134.33 yen on Sept. 18.

The Philippine peso traded near a three-month high after the central bank on Sept. 24 said remittances from overseas nationals and the balance of payments surplus may exceed forecasts. Exports may decline at a slower pace, Director Rosabel Guerrero told reporters in Manila.

Ringgit Strategy

Malaysia’s ringgit dropped yesterday, paring a weekly gain, on speculation a rally that drove the currency to a nine-month high was too rapid given the nation’s economic recovery trails other emerging markets in the region.

Bank Negara Malaysia said expansion later this year will be modest and its record-low benchmark interest rate was still appropriate. The central bank will likely keep its policy rate at 2 percent until mid-2010 because growth is “underperforming” the rest of Asia, Citigroup Inc. said in a research note on Sept. 24.

The currency declined 0.2 percent to 3.4711 per dollar yesterday, according to data compiled by Bloomberg. For the week it was up 0.3 percent.

Investors should buy the ringgit against the Singapore dollar because higher commodity prices will spur Malaysia’s economic recovery over the next six months, Australia & New Zealand Banking Group Ltd. said yesterday in a research note.

The ringgit may advance 2 percent to 2.40 per Singapore dollar by the end of the first quarter of 2010 as increases in prices of crude oil, palm oil and rubber will help Malaysia’s economy expand at a faster pace than its southern neighbor, strategist Yeo Han Sia said in a research note yesterday.

“We expect the base effect in commodity prices to narrow the export gap in Malaysia’s favor, having knock-on effects for portfolio flows and the currency cross rate,” wrote Yeo, who is based in Singapore.

Elsewhere, the Singapore dollar slid 0.1 percent this week to S$1.4160 versus the greenback. The Taiwan dollar rose 0.5 percent to NT$32.458 and the baht rose 0.4 percent to 33.60 from Sept. 18. The yuan closed at 6.8282 in Shanghai, from 6.8279.