By Bob Chen and Patricia Lui
March 31 (Bloomberg) -- Asian currencies posted their first monthly gain since December as stocks rallied on optimism government stimulus spending will help revive regional economies and draw investors back to emerging markets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, climbed 2.7 percent in March, trimming a loss for the quarter to 2.7 percent. Overseas funds bought more shares than they sold this month in South Korea, Indonesia, Taiwan and Thailand, putting the MSCI Asia Pacific Index on course for its biggest monthly advance since December. The rally in Asian currencies may be reaching a peak, according to Calyon, a unit of France’s Credit Agricole SA.
“Various currencies like the Korean won had been heavily oversold and were due for some sort of a pull back,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “Some equity markets rallied around 20 percent which eased risk aversion and helped capital flow back into many Asian markets.”
The Korean won closed at 1,383.25 per dollar, according to Seoul Money Brokerage Services Ltd. It advanced 11 percent in March, the best performing Asian currency. Indonesia’s rupiah trailed, rising 3.7 percent to 11,558, followed by Taiwan’s dollar, which gained 3 percent to NT$33.917 this month.
Stocks Rebound
Stocks rebounded after Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. said they were profitable in the first two months of 2009. Bank of America and JPMorgan said this week that they may not have performed so well in March. U.S. Treasury Secretary Timothy Geithner said some U.S. banks will need “large amounts” of assistance.
The Standard & Poor’s 500 Index, the benchmark for U.S. stocks, advanced 21 percent in the 14 trading days ended March 27, the most over a stretch of that size since 1938, according to data compiled by New York-based S&P analyst Howard Silverblatt.
The gauge dropped 3.5 percent yesterday, trimming its March rally to 7.1 percent, after President Barack Obama’s administration warned that General Motors Corp. and Chrysler LLC have one last change to restructure.
“After Geithner said the banks need more help, there’s resumption of risk aversion and people preferred safe-haven assets again,” said David Mann, senior foreign-exchange strategist at Standard Chartered Bank. Mann predicted the Taiwan dollar, Singapore dollar, Thai baht and Malaysian ringgit will weaken further this year because their economies are “more open to the global slowdown.”
‘Extended Consolidation’
The won rounded out its first monthly gain of the year as the country’s stocks rallied the most since 2001 and the nation’s finances improved. The MSCI regional share index climbed 7.8 percent in March.
The Korean currency pared a loss for the quarter to 9 percent as the current-account balance turned to surplus and the government announced a stimulus spending package to help avert a recession. Manufacturers’ confidence rebounded from near a record low to reach the highest in five months, according to a central bank report today, causing the won to reverse an earlier loss.
“The won flipped after a weak opening as local stocks powered higher,” said Jo Hyun Suk, a foreign-exchange dealer with Korea Exchange Bank in Seoul. “The undercurrent is not that bad for the won.”
Japan and South Korea agreed to extend their bilateral currency-swap accord by six months through to the end of October, Bank of Korea said today, adding that “this action mitigates adverse influences of the global financial turmoil on the two sound and well-managed economies and contributes to securing stability in regional financial markets.”
China Swaps
China’s central bank said it’s in talks to sign more currency-swap agreements to bolster international trade, after sealing six such accords since November 2008.
The People’s Bank of China has set up 650 billion yuan ($95 billion) worth of swaps to provide short-term liquidity, according to a statement today on its Web site. The central bank said the funding will promote bilateral trade and direct investment by allowing one country to pay for imports in another nation’s currency.
The central bank has entered swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Belarus and Argentina, broadening access to the yuan, which isn’t freely convertible.
The rupiah pared losses of as much as 2.5 percent on speculation Bank Indonesia intervened to stem the decline, while stock gains fueled optimism overseas investors will buy more local equities.
Rupiah Intervention
“The rupiah’s steep losses earlier today were due to the sell-off in regional currencies, stocks and bonds following through from yesterday and overnight,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. “But stocks turned positive by late morning and BI also intervened to offer dollars. So the rupiah recovered a bit.”
The rupiah was little changed at 11,548 a dollar after slipping to 11,840, the lowest level since March 20, according to data compiled by Bloomberg. Foreign funds bought $147 million more local stocks than they sold this month.
Elsewhere, the Thai baht was at 35.46 per dollar, headed for a monthly advance of 1.9 percent, Bloomberg data show. Malaysia’s ringgit strengthened 1.6 percent for the month to 3.6445. India’s rupee rose 0.3 percent to 50.8050 and Vietnam’s dong declined 1.8 percent to 17,797.00. The Philippine peso gained 1 percent to 48.333, according to Tullet Prebon Plc.
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net
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