Asian Currencies Gain, Led by Rupiah, Won, as Fund Inflows Rise

By Kim Kyoungwha

April 16 (Bloomberg) -- Asian currencies rose, led by the Indonesian rupiah and South Korea’s won, as optimism a global recession is easing bolstered demand for emerging-market assets.

Seven out of the region’s 10 most-traded currencies outside of Japan climbed and stocks rallied after the Federal Reserve said the pace of contraction slowed in several of the nation’s biggest regional economies last month. Currencies and stocks pared gains after China reported today that its economy expanded at the slowest pace in almost a decade in the first quarter.

“There was a good bid tone to regional currencies on some momentum to the view that the first quarter may have represented a trough in the real data,” said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. “However, when there are renewed concerns over corporate earnings or other numbers, the market can swing very quickly.”

The rupiah strengthened 1.3 percent to 10,750 per dollar as of 3:52 p.m. in Jakarta and the won rose 0.5 percent to 1,332.10, nearing a three-month high, ,according to data compiled by Bloomberg. The MSCI Asia Pacific index of regional shares climbed 0.3 percent, after rising as much as 2.2 percent.

Indonesia’s currency extended a week-long rally on speculation the nation’s commodity exports and the prospect of the government being re-elected will help the economy recover from a global slump.

Indonesia Bond Sale

The currency was also buoyed as Indonesia’s offering of $650 million in Islamic bonds attracted orders for more than six times the amount planned. The rupiah is leading gains this month among Asia’s 10 most-active currencies, the Jakarta Composite Index of stocks has rallied over 13 percent so far in April, already beating the rise in March, and the country’s local-currency bonds are outperforming the rest of the region.

“We think the economic growth will improve as commodity prices find a floor, while the elections are likely to be peaceful as well, and we already saw that with the parliamentary elections,” Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore, said in an interview on Bloomberg Television. “We’ve had an overweight rating on the rupiah since March.”

The Jakarta Composite Index rose 1.4 percent, a fourth day of gains, while foreign investors bought $138 million more Indonesian equities than they sold this month.

China Economy Slows

China’s economy expanded 6.1 percent in the first quarter from a year earlier, after a 6.8 percent gain in the final quarter of 2008, the statistics bureau said in Beijing. The figure was below the 6.2 percent median estimate of 13 economists surveyed by Bloomberg News.

Five of 12 Fed district banks “noted a moderation in the pace of decline,” the U.S. central bank said yesterday in its Beige Book business survey, published two weeks before officials meet in Washington to set monetary policy.

China’s economy shows signs that Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus plan is working, fueling a surge in bank lending and spurring the Shanghai Composite Index to an eight-month high. Growth in investment and industrial output accelerated in March and incomes grew in the first quarter, today’s report showed.

China’s non-deliverable forwards showed the yuan will rise to 6.7580 per dollar in a year, compared with 6.8323 in the spot market, after the release of first-quarter growth. Today’s report coincides with a statement from U.S. Treasury Secretary Timothy Geithner that China isn’t a currency manipulator.

Yen Gains

“Retail sales and fixed asset investments are growing very fast, a huge success of the government in a quick implementation of fiscal stimulus,” said Dairusz Kowalczyk, a currency strategist with SJS Markets Ltd. in Hong Kong. Growth will accelerate to 7.5 percent this quarter, a Bloomberg survey showed.

The yen rose to a two-week high against the euro, as China’s growth data damped demand for higher-yielding assets. The yen climbed to 129.93 per euro in London from 131.44 in New York yesterday. It gained to 98.64 to the dollar from 99.37 yen.

The Korean currency extended its gain over the past month to 6.6 percent. Overseas investors bought more Korean shares than they sold today, helping lift the Kospi stock Index as much as 2.9 percent before closing up 0.3 percent.

“The movements in the currency market are a simple reflection of stock moves these days,” said Ko Yun Jin, a foreign-exchange dealer with Kookmin Bank in Seoul. “Exporters are willing to settle deals on the dollar’s highs, while there’s demand for the greenback from dividend payments.”

Stock Inflows

Malaysia’s ringgit rose to a one-week high of 3.5829 versus the greenback before trading 0.2 percent higher at 3.6012 in Kuala Lumpur.

Investors pumped more money into emerging-market equities for a fifth straight week, adding a net $2.2 billion through April 8 as they sought higher returns, according to Cambridge, Massachusetts-based EPFR Global, a research company that tracks $11 trillion of funds.

“Investors are getting back their confidence because all those stimulus efforts may already be showing early results,” said Irwaan Iskandar Abrahim, who helps manage $134 million at ASM Investment Services Bhd. in Kuala Lumpur. “That should support stocks and the ringgit.”

Thailand’s baht rose to a one-week high on optimism political stability will return after the government quelled street protests and the state of emergency in the capital Bangkok entered its fifth day.

Thai Unrest

The currency resumed trading onshore after a three-day national holiday during which protesters laid siege to Government House seeking to bring down the four-month old government of Prime Minister Abhisit Vejjajiva. The emergency decree will be lifted when the authorities can guarantee safety, Abhisit said today. Fitch Ratings lowered the nation’s credit-ratings today, citing the unrest, following Standard & Poor’s rating adjustment yesterday.

“The baht has recovered lost ground because the situation was resolved very quickly, at least for now,” said Apichart Suratanasurang, a currency trader at BankThai Pcl in Bangkok. “What has happened, however, only worsened the situation as economic conditions are already deteriorating.”

The baht traded at 35.38 per dollar versus 35.40 on April 10, according to data compiled by Bloomberg. It earlier reached 35.33, the highest level since April 7.

Elsewhere, the Singapore dollar rose 0.2 percent to S$1.4989 against the U.S. currency and the Philippine peso climbed 0.2 percent to 47.72. Taiwan’s dollar was little changed at NT$33.80 and the yuan traded at 6.8324 from 6.8322 yesterday.

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