Asian Currencies Rise for a Third Week, Led by India's Rupee, on Inflows

Asian currencies strengthened for a third week, led by India’s rupee, as global investors pumped more funds into the world’s fastest-growing economies.

The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest in more than two years month and the MSCI Asia Pacific Index of shares advanced as stock markets in India, South Korea and Taiwan each attracted more than $1 billion from abroad. China’s yuan had its best week since May 2008 as the U.S. called for faster appreciation and government reports showed pickups in industrial output, retail sales and inflation.

“The trend remains for Asian currencies to strengthen,” said Tohru Nishihama, economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds will continue to flow into the region as the economic growth outlook in Asia is solid and stocks in the region have been rising.”

The rupee appreciated 1.3 percent this week to 45.845 per dollar in Mumbai, according to data compiled by Bloomberg. The yuan was 0.7 percent stronger at 6.7235, the Korean won climbed 0.4 percent to 1,160.70 and Taiwan’s dollar advanced 0.5 percent to NT$31.739. Thailand’s baht rose 0.4 percent to 30.72, a seventh straight weekly gain.

The Asia Dollar Index, which tracks the region’s 10 most used currencies excluding the yen, added 0.3 percent and the MSCI Asia Pacific Index climbed 2.2 percent. Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July.

Stock Inflows

Equity funds investing in Asia excluding Japan recorded the highest inflows in seven weeks during the period through Sept. 15, according to EPFR Global. The trend was “underpinned by renewed faith in the growth stories of the region’s heavyweights, China and India,” the research firm said.

India’s central bank this week increased interest rates for the fifth time in 2010 and Chinese Premier Wen Jiabao said his nation’s economy, the world’s second-largest, was in “good shape.” U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains in the yuan, which yesterday touched the strongest level since official and market exchange rates were unified at the end of 1993.

The Philippine peso dropped 0.2 percent this week to 44.188 per dollar after central bank Governor Amando Tetangco said on Sept. 14 that policy makers were monitoring gains and signaled action may be taken to curb volatility. Japan unilaterally sold the yen on Sept. 15 in an attempt to halt appreciation after the currency climbed to a 15-year high versus the dollar.

“There’s a possibility that the rest of Asia will try to do the same to keep their exports competitive,” said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur.

Malaysia’s ringgit rose 0.2 percent this week to 3.1020 per dollar, having reached a 13-year high of 3.0969 on Sept. 13. The Singapore dollar appreciated 0.5 percent to S$1.3340, a fifth straight weekly gain.