BLBG:Asia Currencies Rally on Demand for Yield as Greece Scraps Referendum Vote
Asian currencies rallied, paring this week’s losses, after Greece scrapped plans for a referendum that put its bailout in jeopardy, fueling investor appetite for emerging-market assets.
South Korea’s won led the advance after the European Central Bank cut borrowing costs, boosting demand for higher- yielding securities. Interest rates in the region are as high as 8.5 percent in India and 6.5 percent in Indonesia, compared with the ECB’s 1.25 percent and as low as zero in the U.S. The yuan had a second weekly gain after Lael Brainard, U.S. Treasury undersecretary for international affairs, said the nation is starting to commit to a more flexible exchange rate.
“The retraction by Greece to hold a referendum will help to reduce volatility in the foreign-exchange market,” said Syhiful Zamri, director of investment, research and advisory at Kenanga Investors Bhd. in Kuala Lumpur. “This isn’t over yet as we need to see if people in Greece accept the rescue package.”
The won jumped 1.7 percent to 1,110.70 per dollar at the close in Seoul, trimming the week’s loss to 0.5 percent, according to data compiled by Bloomberg. Taiwan’s dollar climbed 0.7 percent to NT$30.025 per dollar, paring its five-day decline to 0.5 percent. Thailand’s baht rose 0.4 percent to 30.66 per dollar and dropped 0.4 percent from a week ago.
Fund Inflows
The MSCI Asia-Pacific Index of regional equities rallied 2.4 percent, halting a four-day decline. Funds investing in developing-nation stocks attracted $3.5 billion in inflows in the week ended Nov. 2, the biggest amount since early April, Citigroup Inc. analyst Markus Rosgen wrote in a research report yesterday, citing figures compiled by EPFR Global.
Benchmark 10-year government bonds in South Korea, Indonesia and the Philippines offer yields of 3.84 percent, 6.32 percent and 5.77 percent, respectively, Bloomberg data show. U.S. Treasuries yield 2.03 percent, while German bunds, seen as the European benchmark, are 1.82 percent.
“The ECB rate cut will boost demand for higher-yielding currencies,” said Yu Won Jun, a Seoul-based foreign-exchange dealer with Korea Exchange Bank. “Uncertainties around Greece eased a lot after the country gave up plans for a referendum.”
World leaders expressed impatience and irritation with Europe’s inability to resolve its two-year financial crisis as they pressed for a swift resolution at a gathering of Group of 20 officials in Cannes, France, on Nov. 3. Greek Prime Minister George Papandreou faced a confidence vote in parliament.
The People’s Bank of China set a record daily reference rate for the yuan yesterday after the U.S. Treasury’s Brainard said the Asian nation is “playing a quite constructive role” in conversations that will commit trade “surplus countries” to stepping up domestic consumption. Currency flexibility “will be part of the action plan” announced by the G-20, he said.
‘Narrow Trade Imbalances’
“The latest comments signaled China won’t slow the pace of yuan appreciation even as growth moderates,” said Edmond Law, deputy head of foreign-exchange at BWC Capital Markets in Hong Kong. “A stronger yuan could address calls among global leaders to narrow trade imbalances.”
The yuan advanced 0.19 percent yesterday to 6.3392 per dollar in Shanghai, contributing to a weekly advance of 0.3 percent, according to the China Foreign Exchange Trade System. The People’s Bank of China raised its daily fixing by 0.05 percent to 6.3165, the highest level since July 2005.
Malaysia’s ringgit strengthened for the first time in five days after the government reported export growth that beat economists’ forecasts. Overseas sales rose 16.6 percent from a year earlier in September, the most in 16 months, official data showed. That was more than the median estimate in a Bloomberg survey for an increase of 12.1 percent. The currency rallied 0.7 percent to 3.1143 per dollar yesterday, trimming the week’s loss to 1.5 percent.
Elsewhere, the Philippine peso climbed 0.5 percent to 42.91 per dollar and Indonesia’s rupiah rose 0.2 percent to 8,950 per dollar. The two currencies dropped by 0.7 percent and 1.8 percent this week, respectively. India’s rupee advanced 0.1 percent yesterday to 49.1113 per dollar and fell 0.7 percent this week.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Elffie Chew in Kuala Lumpur at echew16@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
