Yumi Teso, Bloomberg
Singapore: Asian currencies rose this week as investors put money back into emerging markets on speculation a cut in US interest rates will help support growth in the region.
Eleven of 15 most-actively traded Asia-Pacific currencies strengthened on the week as an index that tracks local-currency debt in Asia made its biggest weekly jump this year. The Morgan Stanley Capital International Index of regional shares advanced the most since July. Higher-yielding currencies climbed as the Federal Reserve dropped a bias toward higher rates.
“You see a return of risk appetite that spurred currencies’ gains,” said Ben Simpfendorfer, a foreign-exchange strategist at Royal Bank of Scotland Plc. in Hong Kong. “The market is thinking about the possibility of US rate cuts and has fewer concerns on US growth. Higher-yielders are particularly benefiting.”
The Philippine peso jumped 1.4% in the five-day period to 48.145 against the dollar at the 4 pm close of onshore trade in Manila, the biggest weekly rally since 7 July, according to data compiled by Bloomberg. The Malaysian ringgit, which yesterday reached the highest since February 1998, climbed 1.5% to 3.4560.
Indonesia’s rupiah surged the most this week since 7 July, up 1.2% to 9,108, while the Singapore dollar strengthened 0.6% to S$1.5169 after touching S$1.5165, the highest since September 1997.
The Fed on 21 March kept its benchmark interest rate at 5.25% and unexpectedly abandoned a reference to “additional firming,” raising speculation the bank will cut rates this year. Indonesia’s key rate is 3.75 percentage points higher than that of the US and the Philippines’ is 2.25 points more.
The ringgit also advanced after Malaysia’s central bank said it will let local banks place bigger bets in the foreign-exchange market.
Bank Negara Malaysia will remove in April a requirement that domestic banks limit their net open positions in the currency market to 20% of their capital, according to its annual report released 21 March. The following day the government offered companies incentives to invest in the southern state of Johor and scrapped capital gains taxes on property sales.
“It’s a very attractive move and will attract more capital inflow into Malaysia,” helping boost the ringgit, said Steve Rowles, an analyst at CFC Seymour Ltd in Hong Kong.
In South Korea, the won had the best week since December as overseas investors purchased the nation’s equities.
Inflows to Stocks
“Risk appetite is back, encouraging people to put money into regional markets such as South Korea,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “South Korea’s currency as well as other Asian currencies look bullish.”
Korea’s won climbed 0.8% this week to 937.50 against the dollar, the strongest close since 16 February, according to Seoul Money Brokerage Services Ltd. It may strengthen to around 932 next week, Soma said.
Purchases of Korean shares by investors based overseas exceeded sales every day since 20 March and today surpassed by the most since 26 February, stock exchange data show.
HSBC Holdings Plc’s index of local-currency debt, which includes Indonesia, the Philippines and Thailand, rose 0.9% this week, the most since November.
Currency Sales Speculation
The Thai baht dropped the most this month on speculation the central bank sold the currency and after the government said it is planning measures to help exporters.
The baht gained 2.3% this year in the onshore market, the best performer among the Asia-Pacific currencies. Prime Minister Surayud Chulanont said today that “everybody is worried” about the baht’s strength and the Finance Ministry and the central bank are monitoring the currency.
“There is speculation in the market the central bank is aggressively intervening to sell the baht,” said Tetsuo Yoshikoshi, a market analyst at the treasury unit of Sumitomo Mitsui Banking Corp. in Singapore. “Amid such speculation, the prime minister’s comments raised concern the government will put another restriction on the baht, making people nervous.”
The baht fell 0.7% to 34.89 onshore, according to data compiled by Bloomberg. It yesterday reached 34.61, the strongest since 26 September 1997.
Elsewhere in the region, the Taiwan dollar fell 0.1% today to NT$33.04, trimming the weekly gain to 0.2%, according to Taipei Forex Inc.
—With reporting by Oliver Biggadike in Singapore and Shanthy Nambiar in Bangkok