Asian Currencies Gain, Led By Ringgit, on Overseas Investment

Jan. 16 (Bloomberg) -- Asian currencies advanced this week, led by the Malaysian ringgit and Thailand’s baht, as improving regional economies attracted funds from abroad.

Investors put almost $3 billion into equity and bond funds in developing nations in the week to Jan. 13, following record inflows in 2009, according to Massachusetts-based fund tracker EPFR Global. U.S. retail sales unexpectedly fell last month, the Commerce Department reported on Jan. 14, prompting futures traders to pare bets that the Federal Reserve will raise its benchmark interest rate from near zero by mid-year.

“The inflows are going to lift Asian currencies, especially now that the market is looking at a delay in Fed hikes,” said Choong Yin Pheng, manager of economic and fixed- income research at Hong Leong Bank Bhd. in Kuala Lumpur. “The ringgit has done well for a laggard.”

The ringgit appreciated 1.1 percent to 3.3407 per dollar in Kuala Lumpur from a week ago, according to data compiled by Bloomberg. The baht gained 0.9 percent to 32.87 and Taiwan’s dollar climbed 0.2 percent to NT$31.828, approaching a 16-month high.

Asia is seeing signs of a V-shaped recovery and regional economies will expand 6.6 percent this year after growing 4.5 percent in 2009, Asian Development Bank President Haruhiko Kuroda said on Jan. 14.

U.S. Rate Outlook

South Korea’s won completed a four-week rally, climbing 0.7 percent to 1,123.07 from 1,130.75 on Jan. 8. It touched a 16- month high of 1,117.40 on Jan. 11.

Investors were net buyers of $826 million worth of Korean stocks this year and $1.8 billion in India, adding to record purchases in both countries in 2009, stock exchange data showed. India’s rupee gained 0.1 percent for the week to 45.7200.

New York Federal Reserve Bank President William Dudley said on Jan. 14 that short-term rates may remain low for at least six months and possibly for as long as two years.

Fed fund futures on Jan. 14 showed a 28 percent chance the Fed will lift rates by the end of June, from 40 percent odds a week ago.

A report from the Bank of Korea on Jan. 22 may show the economy expanded 6.3 percent from a year earlier in the fourth quarter of 2009, the most in seven years, according to economists surveyed by Bloomberg.

The People’s Bank of China on Jan. 12 announced an increase to the amount of deposits that banks must set aside as reserves to help cool record loan growth and prevent bubbles in real- estate and stock prices.

“Risk appetite is still pretty solid; there was some pullback after the China tightening, but generally flows into the region are maintaining momentum,” said Mirza Baig, a Singapore-based currency strategist at Deutsche Bank AG, the world’s biggest foreign-exchange trader. “Some consolidation is quite normal after the big move at the beginning of January.”

Yuan Forwards

Yuan forwards rose for a second week on speculation the central bank will allow currency appreciation to resume to stem inflation.

Foreign direct investment more than doubled in December the Ministry of Commerce reported yesterday, after the government said Jan. 14 that property prices in 70 Chinese cities rose at the fastest pace in 18 months. Official data next week may show consumer prices increased at the quickest rate in more than a year, according to a Bloomberg News survey of economists.

Twelve-month non-deliverable yuan contracts rose 0.3 percent in the week to 6.6100 per dollar, indicating brokerages are betting the currency will advance 3.3 percent from the spot rate of 6.8269 in the coming year.

“Investors still expect the yuan to rise amid optimistic economic data,” said Guan Jiaying, a Beijing-based analyst at China Citic Bank. “The currency is one of the tools to address inflation concerns in China.”

The mainland’s foreign-exchange reserves climbed 23 percent to a record $2.4 trillion in December, the central bank reported yesterday.

‘Positive’ on Rupiah

Indonesia’s rupiah fell yesterday, paring the week’s gain, on concern the start of policy tightening by Asian central banks will curtail an economic recovery.

The currency has appreciated 2 percent this year, adding to a 16 percent rise in 2009 and leading to speculation Indonesia’s central bank will intervene to slow the advance.

“We are still positive on the rupiah but maybe not as much as last year simply because it has gained a lot already,” Thomas Harr, senior currency strategist at Standard Chartered Plc in Singapore, said in an interview on Bloomberg Television. “We see the possibility of more monetary tightening in China.”

The rupiah dropped 0.3 percent to 9,195 per dollar in Jakarta, according to data compiled by Bloomberg. It climbed 0.2 percent for the week from 9,215 on Jan. 8 and is the third-best performing currency in Asia this year.

Elsewhere in Asia, the Philippine peso was little changed for the week at 45.820 versus the greenback and the Singapore dollar advanced 0.7 percent to S$1.3891. Vietnam’s dong was unchanged at 18,474.