BS: Asian Currencies Advance on Rate Outlook, Drop in Crude Prices
By Yumi Teso
March 9 (Bloomberg) -- South Korea’s won led gains in Asian currencies on speculation central banks will raise borrowing costs to tame inflation, widening the region’s yield advantage over developed economies.
The Bank of Thailand boosted its benchmark rate today and all 15 economists surveyed by Bloomberg expect the Bank of Korea will lift its policy rate by 25 basis points to 3 percent tomorrow. The MSCI Asia-Pacific Index of regional shares snapped a two-day decline as crude prices fell for a second day, easing concern that rising energy costs will slow the global economy and stoke inflation.
“The market is looking to see some more-active monetary policy,” said Chris Gothard, the Hong Kong-based head of foreign-exchange business for Brown Brothers Harriman. “As soon as you see a little bit of easing in oil prices, that should help some of the emerging-market currencies.”
The won strengthened 0.2 percent to 1,115.65 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Philippine peso, Indonesia’s rupiah and India’s rupee all rose 0.2 percent to 43.365, 8,770 and 45.005 respectively.
Benchmark interest rates of 6.75 percent in Indonesia and 6.50 percent in India compare with a maximum of 0.25 percent in the U.S. and Japan.
The won and the Kospi share index both climbed for a second day. South Korea’s inflation in February breached the central bank’s 4 percent target ceiling for a second month.
Fund Inflows
“The jury is still out on whether high inflation should lead to faster won appreciation,” said Andy Ji, a Singapore- based currency strategist at Commonwealth Bank of Australia. “But for now, it seems positive for the won as Bank of Korea is expected to move on rates tomorrow.”
The baht reached a two-month high after the Bank of Thailand lifted the one-day bond repurchase rate by a quarter of a percentage point to 2.50 percent. The decision was predicted by 17 of 20 economists surveyed by Bloomberg with three expecting no change. The currency advanced for an eighth day as central bank Assistant Governor Paiboon Kittisrikangwan said after the announcement that the monetary authority would continue to raise borrowing costs.
The baht strengthened 0.1 percent to 30.33 per dollar and touched 30.30, the strongest level since Jan. 7.
The Philippine peso snapped two days of losses as signs the global economic recovery is gaining traction shored up demand for emerging-market assets.
“Inflows are going to Asia and we will see the peso strengthening at a gradual rate,” said Rafael Algarra, a treasurer at Security Bank Corp. in Manila.
Elsewhere, Malaysia’s ringgit was little changed at 3.0328 per dollar, according to data compiled by Bloomberg. The Taiwan dollar advanced 0.1 percent to NT$29.395, Singapore’s dollar dropped 0.1 percent to S$1.2689 and China’s yuan declined 0.06 percent to 6.5721.
--With assistance from Patricia Lui in Singapore, Andrea Wong in Taipei and Karl Lester M. Yap in Manila. Editors: Ven Ram, Simon Harvey
