BLBG:Asia Currencies Gain, Led by Taiwan, as Fed Easing Spurs Inflows
Asian currencies strengthened, led by Taiwan’s dollar and Indonesia’s rupiah, as the Federal Reserve’s asset-purchase plan spurred inflows into the region’s higher-yielding assets.
International investors increased holdings of South Korean, Taiwanese and Indonesian stocks by $1.8 billion on Sept. 14, a day after the Fed announced it would expand holdings of long- term securities with open-ended buying of $40 billion of mortgage debt per month in a third round of quantitative easing. The MSCI Asia Pacific Excluding Japan Index (MXAPJ) of shares touched a four-month high today after advancing by 3.1 percent, the most this year, on Sept. 14.
“The QE3 is giving a boost to sentiment and expectations of capital inflows,” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale SA in Hong Kong. “The boost for the foreign-exchange rate from QE3 is likely to be temporary.”
Taiwan’s dollar rose 0.8 percent to NT$29.226 against its U.S. counterpart as of 10:50 a.m. in Taipei, touching a four- month high earlier, according to data compiled by Bloomberg. The rupiah strengthened 0.6 percent to 9,450 and the Philippine peso advanced 0.1 percent to 41.37, after reaching a four-year high.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most active currencies, was steady after four days of gains. The gauge’s 60-day historical volatility was 3.41 percent, compared with 3.42 percent on Sept. 14.
‘Speculative Money’
“It looks like there’s a lot of speculative money coming into Taiwan,” said Tarsicio Tong, a foreign-exchange trader at Union Bank of Taiwan in Taipei. “The Taiwan dollar’s surge was also caused by panic selling of the greenback” due to speculation the local currency will strengthen beyond the NT$29 per dollar level, he said.
Policy makers must control volatile capital flows as quantitative easing measures taken in the U.S. and Europe have a “negative spillover” into developing countries, Bank of Korea Governor Kim Choong Soo said on Sept. 14. The won added 0.2 percent to 1,114.75 per dollar.
“It’s a market still driven by the Fed’s announcement, although further gains will depend on overseas inflows to the stock market,” said Lee Jung Hyun, a Seoul-based currency dealer at Industrial Bank of Korea. With the BOK governor’s comments, there is increased caution against government intervention to stem currency gains, he said.
Philippine central bank Governor Amando Tetangco said today that the nation will stay watchful of inflows and indications of asset-price bubbles, adding the central bank will guard against “any disruptions” that may lead to sharp foreign-exchange rate fluctuations.
Elsewhere, China’s yuan fell 0.02 percent to 6.3158 per dollar. Thailand’s baht weakened 0.2 percent to 30.81, the Hong Kong dollar rose 0.01 percent to HK$7.7519 and Vietnam’s dong dropped 0.1 percent to 20,865. Malaysia’s financial markets are closed today for a holiday.
-- Editors: Andrew Janes, Amit Prakash
To contact the reporters on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net Yumi Teso in Bangkok at yteso1@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.
