BLBG : Asian Currencies Rise Led by Won, Rupiah on U.S. Recovery Signs
Aug. 24 (Bloomberg) -- Asian currencies advanced, led by South Korea’s won and the Indonesian rupiah, as signs of economic recovery in the U.S. and Europe boosted investor demand for emerging-market assets.
Stocks around the world rallied after sales of existing homes in the U.S. rose to the highest level in almost two years. Economists forecast the euro region will report today that industrial orders recovered in June after two months of contraction. Malaysia’s ringgit strengthened before a central bank report on Aug. 26 that may show the economy is recovering from its worst slump since 2001.
“We still have huge amounts of liquidity in the global financial system and money needs to flow somewhere,” said Patrick Bennett, Hong Kong-based currency strategist at Societe Generale SA. “The numbers on balance have been better than expected. For the won, risk appetite is still there but I’d caution not to get too excited.”
The won climbed 0.6 percent to 1,242.40 per dollar as of 1:19 p.m. in Seoul, according to data compiled by Bloomberg. The rupiah rose 0.3 percent to 9,985, and the Taiwan dollar appreciated 0.2 percent to NT$32.833.
The MSCI Asia Pacific Index of regional stocks advanced 2.4 percent today, the most since July 14. In New York, the Standard & Poor’s 500 Index climbed 1.9 percent on Aug. 21 to the highest level since October.
Recovery Signs
A Bloomberg News survey of economists showed orders at industrial companies in the euro region gained 1.8 percent from a month earlier following a 0.2 percent contraction in May, while on an annual basis orders dropped 28.3 percent, slowing from a 30.1 percent decline the previous month. The European Union’s statistics office will announce the data in Luxembourg today.
Existing home purchases in the U.S., the world’s biggest economy, climbed 7.2 percent in July to a 5.24 million annual rate, the most since August 2007, according to the National Association of Realtors.
The global economy is “beginning to emerge” from a recession after aggressive action by central banks and governments, Federal Reserve Chairman Ben S. Bernanke said on Aug. 21 at a symposium in Jackson Hole, Wyoming.
The yen fell to 135.93 per euro in Tokyo from 135.21 in New York on Aug. 21 as optimism for an economic rebound reduced demand for the relative safety of the Japanese currency. It touched 136.01, the weakest since Aug. 14. The dollar rose to 94.82 yen from 94.38 yen.
Malaysia GDP
Malaysia’s ringgit reached a one-week high after crude oil prices jumped for a fifth day, boosting the outlook for the nation’s second-largest commodity export. The economy will likely return to positive growth by the fourth quarter, central bank Governor Zeti Akhtar Aziz said in Kuala Lumpur on Aug. 17.
“Demand for the ringgit should increase with a better trade outlook and oil prices,” said Rosnani Rasul, head of research at MIMB Investment Bank Bhd. in Kuala Lumpur. “Market sentiment is improving.”
The ringgit gained 0.1 percent to 3.5100 per dollar and touched 3.5008, the strongest level since Aug. 10. The currency may rise to 3.40 by the end of this year, Rasul said.
Malaysia’s gross domestic product shrank 5.3 percent in the second quarter from a year earlier, according to the median forecast in a Bloomberg survey before the Bank Negara Malaysia report this week. GDP contracted 6.2 percent in the previous three months, sliding for the first time since 2001.
Malaysia Swaps
Investors should lock in Malaysian fixed interest rates because the market is pricing in too rapid an increase in borrowing costs, DBS Group Holdings Ltd. said.
A three-year swap rate of 3.06 percent offers 92 basis points more than the Kuala Lumpur three-month inter-bank offered rate, or Klibor, about double the average spread this year, according to data compiled by Bloomberg. The swap rate has climbed from 2.28 percent on March 4 as Bank Negara Malaysia ended its rate cuts. All 13 economists in a Bloomberg News survey predict the overnight policy rate will be held at a record-low 2 percent tomorrow for a fourth straight meeting.
“Receiving three-year fixed rates above 3 percent and paying Klibor makes sense because a rate increase in the next 12 months is very unlikely,” Jens Lauschke, a strategist in Singapore at DBS, Southeast Asia’s biggest banking group, said in an Aug. 21 interview.
The central bank lowered its benchmark rate three times from 3.5 percent in November.
Shooting Star
In an interest-rate swap, two parties agree to exchange payments over a period of time. Typically, one agrees to pay a fixed rate, while the other pays a rate that fluctuates with a benchmark index or formula defined in the contract.
The Philippine peso rose 0.2 percent to 48.34 and may rally further following two weeks of declines, after its candle chart showed a “shooting star” pattern, said Winston Tang, a technical analyst at Forecast Pte in Singapore.
The peso closed last week at 48.42 per dollar on Aug. 20, near the U.S. currency’s low for the day of 48.41, according to Bankers Association of the Philippines. The dollar’s rally fizzled after it reached a two-month high of 48.57. Philippine markets were closed on Aug. 21 for a public holiday.
“We’ve seen the top for now” for the dollar, Tang said. “I see the downside momentum all the way to 47.70.” That level was last seen on Aug. 10, which started the two-week ascent, he said. The Philippine currency will extend gains toward 48.15 as early as this week, he said.
A so-called candle chart displays a currency’s high, low, open and close for each day. A “shooting star” pattern forms on a day when a currency that has been rising previously has an open, close and low that are close together and far away from the high for the day.
Elsewhere, Thailand’s baht was little changed at 34.01 per dollar and the Chinese yuan was at 6.8314 from 6.8312 at the end of last week. The Vietnamese dong traded at 17,817 from 17,816.
