SF: Asian Currencies Rise to Two-Year High on Japan Easing Steps
Oct. 6 (Bloomberg) -- Asian currencies rose to a two-year high on speculation the Federal Reserve will join the Bank of Japan in stepping up purchases of government debt, boosting the supply of funds that can be invested in higher-yielding assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10-most traded currencies excluding the yen, climbed to 115.19, the highest level since July 2008. South Korea's won added 1.1 percent to 1,118.13 per dollar as of the 3 p.m. close in Seoul and touched a five-month high of 1,117.65, according to data compiled by Bloomberg. Thailand's baht climbed 0.7 percent to 29.94, rising beyond 30 for the first time since July 1997.
"The Bank of Japan cut rates yesterday and embarked on quantitative easing and the market is now expecting such a move from the Fed," said Dariusz Kowalczyk, Hong Kong-based chief economist for Credit Agricole CIB. "This cheap liquidity will not stay in the domestic countries but look for higher yields abroad, especially in Asia."
Japan announced yesterday it will buy as much as $60 billion of assets after cutting its benchmark interest rate to as low as zero to stimulate growth. Fed Chairman Ben S. Bernanke said on Oct. 4 that the central bank aided the U.S. economy through its $1.75 trillion purchases of mortgage debt and Treasuries that ended in March 2010 and that further buying would likely help more.
Nine of the 10 most-actively-traded currencies in Asia outside Japan have gained against the dollar this year, led by the Thai baht and Malaysia's ringgit. Overseas funds have poured money into the region as economic growth outpaces the U.S. and Europe.
Taiwan Economy
Asia's developing economies will expand 9.2 percent in 2010, compared with growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July. Foreign investors bought more than $35 billion of stocks in India, South Korea and Taiwan than they sold this year, according to exchange data.
Taiwan's dollar rose as much as 1.5 percent before paring gains in the last minute of trading due to suspected intervention by the central bank. It advanced 0.4 percent to NT$31.132, according to Taipei Forex Inc.
The currency has gained 0.6 percent since the central bank on Sept. 30 raised its policy rate for the second time this year to 1.5 percent from 1.375 percent. A government report tomorrow may show exports increased for an 11th straight month in September. Overseas sales, which account for more than two- thirds of Taiwan's economy, climbed 26.6 percent from a year earlier, the same pace as in August, according to the median forecast in a Bloomberg survey.
Higher Returns
Thailand's baht has appreciated more than 11 percent this year, the best performance among Asia's most-traded currencies excluding the yen. The Bank of Thailand yesterday issued details on deregulating currency transactions to enable local businesses to more effectively manage foreign-exchange risk.
"The BOJ's move triggered speculation the pace of fund inflows to emerging Asia will quicken, boosting regional currencies," said Kozo Hasegawa, a Bangkok-based foreign- exchange trader at Sumitomo Mitsui Banking Corp. "Quantitative easing means there will be more money seeking higher returns."
It is normal to see inflows of funds because the economy is strong, Bank of Thailand Deputy Governor Atchana Waiquamdee said today. The finance ministry said Sept. 27 the economy may expand as much as 7.8 percent this year, the fastest growth since 1995.
Elsewhere, Indonesia's rupiah gained 0.2 percent to 8,923 per dollar and Singapore's dollar strengthened 0.3 percent to S$1.3094. Malaysia's ringgit rose 0.2 percent to 3.0903, while the Philippine peso climbed 0.6 percent to 43.505.
--With assistance from Frances Yoon in Seoul and Lilian Karunungan in Singapore. Editors: Simon Harvey, James Regan
