SF: Asian Currencies Gain, Led by Won, on Regional Growth Outlook
Aug. 26 (Bloomberg) -- Asian currencies rose, led by South Korea's won and the Philippine peso, on optimism a combination of economic growth, increases in borrowing costs and tolerance for currency appreciation will spur fund inflows.
The Bloomberg-JPMorgan Asia Dollar Index snapped five days of losses as the Philippines said today its economy expanded the most in three years in the three months through June. Thailand yesterday raised its policy rate for a second time this year, two days after reporting second-quarter growth exceeded economists' estimates. Malaysia said this week the ringgit's 9 percent rally in 2010 reflects domestic economic fundamentals.
"The focus is on the growth story, and Philippine growth is strong like other Southeast Asian countries," said Yuji Kameoka, a senior economist based in Tokyo at Daiwa Institute of Research Ltd. "The peso drew support, together with other Asian currencies, on the back of the strong economic outlook."
South Korea's won strengthened 0.5 percent to 1,189.95 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The peso advanced 0.2 percent to 45.150, according to Tullett Prebon Plc. The Thai baht climbed 0.4 percent to 31.37, its strongest level since April 2008.
The MSCI Asia Pacific Index of shares snapped two days of declines. Foreign investors have bought $3.1 billion more stocks than they sold in India, Indonesia, the Philippines and Thailand so far this month, exchange data show.
'BOK Remains Hawkish'
Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund said on July 7. Thailand's gross domestic product rose 9.1 percent in the last quarter from a year earlier, according to government data, exceeding the 8 percent median estimate in a Bloomberg News survey. Malaysia said last week growth was 8.9 percent, compared with economists' median forecast for an increase of 8.4 percent.
South Korea's won advanced the most in a week, reversing losses, after the central bank signaled higher interest rates to curb inflation.
The Bank of Korea's 25-basis point rate increase last month may not be sufficient to fight inflation, Governor Kim Choong Soo said in an interview in New York. The target overnight policy rate will climb to 2.5 percent by the end of the year from 2.25 percent now, while the won will advance to 1,140 per dollar, according to separate Bloomberg surveys.
"The BOK remains hawkish in its recent comments and our expectations are still for further rate hikes," said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. "This will pressure the dollar-won lower. We are most constructive on the won among the Asian currencies and we expect it to outperform."
'Accommodated Appreciation'
The peso rose for a second straight day after a government report showed the economy expanded 7.9 percent from a year earlier, the fastest pace of growth since mid-2007. Growth this year may be faster than the government's target of as much as 6 percent, Economic Planning Secretary Cayetano Paderanga said. The currency "has accommodated some appreciation" and that "has not undermined external competitiveness," central bank Deputy Governor Diwa Guinigundo said yesterday.
The baht rose on speculation the central bank will add to its interest-rate increases. Policy makers boosted the one-day bond repurchase rate by a quarter of a percentage point to 1.75 percent yesterday. Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said after the decision that borrowing costs still remain low. The currency is the best performer among Asia's most-traded currencies this month with a gain of 2.9 percent.
"The central bank is slowly signaling a further interest- rate hike," said Parson Singha, chief market strategist in Bangkok at HSBC Holdings Plc. "Foreign investors are coming into emerging markets, including the Thai market, based on the growth story, putting appreciation pressure on the baht."
Elsewhere, Singapore's dollar appreciated 0.2 percent to S$1.3562 versus its U.S. counterpart and Taiwan's dollar rose 0.1 percent to NT$32.037. Indonesia's rupiah was unchanged at 8,983.
--With assistance from David Yong in Singapore and Andrea Wong in Hong Kong. Editors: Ven Ram, Andrew Janes
