Asian Currencies Gain This Week as Data Points to Faster Growth

May 15 (Bloomberg) -- Asian currencies appreciated this week, led by Malaysia’s ringgit and South Korea’s won, on signs the region’s economic growth is gathering pace, bolstering demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index had its biggest weekly gain since Jan. 8 after Malaysia reported gross domestic product increased 10.1 percent in the first three months of 2010, the best quarterly performance in a decade. The Philippine peso climbed the most this year as presidential elections passed without incident, spurring a rally in local stocks. A government report yesterday showed Hong Kong’s economy expanded at the fastest pace in four years.

“Asia is fundamentally looking much better,” said Mitul Kotecha, head of global currency strategy at Credit Agricole CIB in Hong Kong. “I don’t think it will escape untarnished from what is happening in Europe, but there is some semblance of resilience for Asian currencies. The data have been upbeat and continue to press for higher interest rates in the region.”

The ringgit strengthened 2.4 percent this week to 3.1955 per dollar in Kuala Lumpur, the biggest five-day gain since October 2009, according to data compiled by Bloomberg. South Korea’s won rose 2.2 percent to 1,130.93, and the Philippine peso climbed 1.7 percent to 44.76.

Bank Negara Malaysia raised its overnight interest rate by 25 basis points to 2.5 percent on May 13, citing a strong recovery in emerging markets. Hong Kong’s GDP rose 8.2 percent in the first quarter from a year earlier, compared with revised growth of 2.5 percent in the prior three months.

Rate Increases

Goldman Sachs Group Inc. raised its forecast for Malaysia’s 2010 growth to 7.3 percent from 5.5 percent. Goldman and HSBC Holdings Plc predicted borrowing costs will climb to 3 percent by year-end, according to research notes to clients.

“The numbers obviously support the currency and the medium-term macro theme in Asia,” said Faizal Yussof, a foreign-exchange trader at KAF Investment Bank Bhd. in Kuala Lumpur. “Whether this will take the rally to 3.15 per dollar is still too early to say.”

Yuan forwards appreciated 0.6 percent this week, the biggest five-day gain since December, on speculation the second U.S.-China Strategic and Economic Dialogue in Beijing on May 24- 25 will foster currency appreciation.

Yuan Peg

China had a trade surplus of $1.68 billion last month as exports climbed 30.5 percent from a year earlier, the customs bureau reported on May 10, topping the 28.9 percent median estimate of 30 economists in a Bloomberg survey.

The People’s Bank of China has indicated it will likely allow appreciation, Xia Bin, one of its academic advisers, said in the China Business News newspaper on May 11. Xia said a reference in the central bank’s latest quarterly report to managing the yuan “with reference to a currency basket” shows a change to the peg is coming.

South Korea’s won gained the most this week since the five- day period ended Jan. 8 after the nation’s unemployment rate dropped to 3.7 percent in April. That marked a third monthly decline from a 10-year high of 4.8 percent reached in January.

The Philippine peso rose on optimism the nation’s debt ratings will be raised following the election of a new president.

Election Euphoria

The Philippines may get a higher rating after the success of its first automated voting “as campaign pledges are translated into policies,” central bank Deputy Governor Diwa Guinigundo said. The cost of protecting the sovereign’s debt from default declined the most this year after Moody’s Investors Service said presidential aspirant Benigno Aquino’s apparent victory “sets a favorable tone for the country’s fundamentals.”

“The market is riding on the euphoria of the elections and the possibility of an upgrade once the new administration firms up its plans on fiscal consolidation,” said Roland Avante, a treasurer at Sterling Bank of Asia in Manila. “The tone is generally optimistic, with waves of risk aversion, depending on external developments.”

Elsewhere, Taiwan’s dollar was little changed this week at NT$31.848 versus the U.S. currency and Thailand’s baht traded at 32.38 compared with 32.35 on May 7. Indonesia’s rupiah climbed 1.3 percent to 9,105 and India’s rupee appreciated 0.6 percent to 45.23.