Asian Currencies Rally Will Fizzle Out, Calyon Says

By Kim Kyounghwa

March 30 (Bloomberg) -- This month’s advance in Asian currencies will soon end as “elevated” risk aversion deters investment in regional assets, according to Calyon, a unit of France’s Credit Agricole SA.

“The Asian FX rally is close to being over,” Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong, wrote in a note to clients today. “Unless there is a further improvement in risk appetite it is difficult to see most Asian currencies strengthening much further.”

All of Asia’s 10 most-traded currencies excluding the yen have climbed this month, paring their declines for the year. South Korea’s won has risen the most, surging 12 percent to 1,375 per dollar, followed by a 3.3 percent gain in the Indonesian rupiah to 11,593.

Stock funds investing in emerging markets took in the most money since mid-December during the week ended March 25, according to EPFR Global, a Cambridge, Massachusetts-based research company. These funds absorbed $2.3 billion of inflows that week, turning year-to-date flows positive by $2.03 billion.

“Risk aversion has eased, but we do not expect this to continue,” Kotecha said. “Any worsening in risk appetite or equity performance in particular will hit Asian currencies.”

The MSCI Asia Pacific Index of shares was 2.6 percent lower as of 12:22 p.m. in Beijing, reducing this month’s advance to 11 percent. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, declined 0.3 percent, trimming its monthly gain to 2.5 percent.

To contact the reporter on this story: Kyoungwha Kim in Beijing at kkim19@bloomberg.net