Asia Currencies: Won, Rupiah Lead Gains on Signs of Recovery

By Patricia Lui

Jan. 27 (Bloomberg) -- Asian currencies rose, led by the South Korean won and Indonesia’s rupiah, on optimism the region’s economic recovery will gain momentum.

The International Monetary Fund said yesterday the global economy this year will be stronger than it previously forecast with few signs of inflation, allowing central banks to keep interest rates low to ensure a sustained expansion. A report today showed Japan’s exports rose in December for the first time since Lehman Brothers Holdings Inc. collapsed in September 2008. The rupiah also rose from the lowest level in more than three weeks as concern eased about further lending curbs by China on domestic banks.

“In my view, markets may have over-reacted on all of the shocks, especially monetary tightening in China,” Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital Management LLP in London and former head of foreign exchange research at Morgan Stanley, wrote in a report yesterday.

The won rose 0.4 percent to 1,158.80 per dollar as of 12:45 p.m. in Seoul, according to data compiled by Bloomberg. Malaysia’s ringgit climbed 0.1 percent to 3.4220 and the rupiah gained 0.3 percent to 9,390.

The MSCI Asia Pacific Index of regional stocks lost 0.3 percent after swinging between gains and losses. The index slumped 5.8 percent in the previous seven days as U.S. President Barack Obama proposed measures to limit risk taking at U.S. banks and on concern China will rein in economic growth.

‘Monster Surplus’

Asian currencies slumped yesterday after Reuters reported reserve requirements for several Chinese lenders would be increased again, citing banking sources it didn’t identify. China’s central bank ordered banks on Jan. 12 to set aside more cash as reserves to slow record lending and curb inflation.

“Rumors China didn’t ask banks to raise reserve ratios again lifted Asian currencies,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore.

The won rose, rebounding from this year’s low, after the central bank reported a record current-account surplus for 2009.

South Korea posted a surplus of $1.52 billion in December, the 11th month in a row, the Bank of Korea said today. The current account is the broadest measure of trade, tracking the flow of goods, services and investment income, and for 2009 recorded a surplus of $42.7 billion. The surplus may shrink “substantially” in January, Lee Young Bog, a Bank of Korea official, said today.

“The current-account surplus was a monster last year, but this year it’s expected to be lower as imports were really weak” in 2009, said Sean Callow, a currency strategist in Sydney at Westpac Banking Corp. “But it’s still quite substantial and will be a net positive for the won this year.”

Overseas investors pumped $944 million into Korean shares this year through yesterday, building on net purchases of $24.4 billion in 2009.

The ringgit climbed from its lowest level this year after the central bank said the economy’s recovery from recession has been underpinned by improvements in manufacturing and trade. Bank Negara Malaysia yesterday maintained the overnight rate at a record-low 2 percent for a seventh straight meeting.

Southeast Asia’s third-largest economy will probably expand 3.7 percent this year and 5 percent in 2011 after shrinking a projected 3.3 percent in 2009, the Malaysian Institute of Economic Research said this week. Prime Minister Najib Razak said Jan. 20 it may be 3.5 percent or more.

“The assessment leaves no doubt that the economic recovery is taking shape, which is positive for the ringgit outlook,” said Irwaan Iskandar Abrahim, who helps manage $130 million at ASM Investment Services Bhd. in Kuala Lumpur.

Improved China Link

Taiwan’s dollar rose on speculation overseas investors will add to their purchases of local stocks after the island’s government and China held talks yesterday on strengthening economic ties. The Taiex index slid 3.5 percent yesterday.

The island’s cabinet has agreed in a preliminary review to let local financial companies and banks acquire stakes in Chinese lenders, the Economic Daily News reported today, citing an unidentified senior official. Chinese banks will only be allowed to set up branches on the island, according to the paper.

“Maybe foreign investors are comfortable again with Taiwan money,” said Eric Hsing, a debt trader at First Securities Inc. in Taipei. “In the long run, I have confidence in Taiwan because relations between Taiwan and China are turning friendly.”

The local dollar advanced 0.1 percent to NT$32.031 against its U.S. counterpart, according to Taipei Forex Inc. The currency earlier reached NT$32.065, the weakest since Jan. 4.

Elsewhere in Asian currency trading, the Singapore dollar rose 0.1 percent to S$1.4034 versus the greenback, while the Thai baht and China’s yuan were little changed at 33.04 and 6.8268, respectively.

To contact the reporters on this story: Patricia Lui at Plui4@bloomberg.net