Asian Currencies Rally for Fifth Week as Recovery Spurs Inflows

March 13 (Bloomberg) -- Asian currencies rallied this week, led by the Malaysian ringgit and South Korea’s won, as improving economic data and reduced concern about Greece’s debt crisis spurred demand for regional assets.

The Bloomberg-JPMorgan Asia Dollar Index gained for a fifth week as stock-exchange data showed overseas investors pumped more than $5 billion into shares in India, Taiwan and Korea since the end of February. China this week announced bigger gains in exports, lending and consumer prices than economists forecast. The central bank in Indonesia, Southeast Asia’s largest economy, raised its 2010 and 2011 growth forecasts and Standard & Poor’s yesterday upgraded the nation’s credit rating.

“Global risk abated as concerns over Greece subsided,” said Sebastien Barbe, head of emerging-market research at Credit Agricole CIB in Hong Kong. “The other driver was the strong Chinese data which boosted yuan appreciation bets. Prospects of rate hikes in the region also supported Asian currencies.”

The ringgit strengthened 1.9 percent from its March 5 close to 3.301 per dollar, according to data compiled by Bloomberg. It was the biggest weekly gain in five months and the currency yesterday touched a 19-month high of 3.300. The won climbed 1.1 percent to 1,128.20, the Philippine peso rose 0.9 percent to 45.65 and Indonesia’s rupiah appreciated 0.7 percent to 9,155.

The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, gained 0.3 percent this week and the MSCI Asia-Pacific Index of shares posted its best close since January. Emerging-market and high-yield bond funds each took in more than $1 billion in the week ended March 10, EPFR Global said yesterday, the most since the research firm began publishing weekly data on the sectors a decade ago.

Greece Risk

Former European Commission President Romano Prodi said March 10 that Greece’s problems are “over” and the rest of the euro region is safe. The nation this month announced the third round of austerity measures this year and sold 5 billion euros ($6.8 billion) of debt, helping shore up confidence in emerging- market assets.

Twelve-month non-deliverable yuan forwards climbed 0.3 percent from March 5 to 6.629 per dollar in Hong Kong, reflecting bets the currency will strengthen 3 percent in a year from the spot rate of 6.8255.

Central bank Governor Zhou Xiaochuan said March 6 that policies introduced to combat an economic slump must end “sooner or later,” fanning speculation interest rates will be raised and the yuan allowed to strengthen. Yuan appreciation has been kept in check since July 2008, following a 21 percent advance in three years, and renewed gains may deter policy makers elsewhere in Asia from trying to limit currency moves that erode the competitiveness of their exports.

Policy Tightening

“Yuan appreciation will support further currency gains in the region,” said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur.

The Philippine peso posted its biggest weekly gain in two months after the central bank this week began to withdraw monetary stimulus by paring a lending program even as it left benchmark rates unchanged at a record low. Bank Negara Malaysia on March 5 increased its overnight policy rate to 2.25 percent, from a record-low 2 percent, and Thailand’s central bank on March 11 signaled plans to raise its benchmark rate from a five- year low.

“BSP’s unwinding of liquidity marks the start of more in the rest of the region and we could see Asian central bank rate hikes in the second quarter which will be supportive of Asian currencies,” Barbe said.

Brighter Prospects

The Indonesian rupiah yesterday touched 9,150 per dollar, the strongest level in almost two months, after the S&P ratings upgrade. The nation’s long-term foreign-currency rating was increased one level to a 12-year high of ‘BB’.

“This is in line with Indonesia’s strong economic fundamentals like improving government debt, rising foreign reserves and accelerating gross domestic product growth,” said Prakriti Sofat, a Singapore-based regional economist at Barclays Plc. “Indonesia has already been attracting a lot of offshore interest and there is potential for more strong inflows, which should support the currency.”

Bank Indonesia yesterday raised its 2011 economic growth forecast to as much as 6.5 percent from an earlier prediction of as much as 6 percent. It earlier in the week raised its estimate for 2010 growth to 5.6 percent from 5.2 percent.

Singapore’s gross domestic product will rise 6.5 percent this year, according to the median forecast of economists in a Monetary Authority of Singapore survey published this week. That compares with the 5.5 percent increase projected in a December poll. Singapore’s dollar climbed 0.4 percent this week to S$1.3946 versus the greenback.

Elsewhere, Taiwan’s dollar advanced 0.6 percent to NT$31.84 and the Thai baht gained 0.2 percent to 32.57.