Currencies on the rise in Asia

BANGKOK - Asian currencies completed a seventh weekly advance, led by the Singapore dollar, as relatively high yields and the world's fastest economic growth spurred demand for assets in the region's developing nations.

The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest level since April 2008 on speculation central banks will be more tolerant of currency gains after Singapore said on Oct 14 it will target faster appreciation in the next six months. Equity funds investing in Asia excluding Japan have taken in more than $1 billion in all but one of the past four weeks, according to data from EPFR Global.

"With so much liquidity now, investors are seeking higher returns and Asia has been attracting those funds," said Minoru Shioiri, chief manager of currency trading in Tokyo at Mitsubishi UFJ Morgan Stanley Securities Co. "Singapore's decision to allow a stronger currency seems to be an acceptance of the weaker dollar trend."

The Singapore dollar climbed 1.2 percent last week to S$1.2965, its best performance in six months, according to data compiled by Bloomberg. India's rupee climbed 0.8 percent to 44.10 after global funds pumped $1.8 billion into the nation's equities in the first four days of the week. Thailand's baht strengthened 0.8 percent to 29.82, an 11th straight weekly gain.

Central banks in India, Malaysia, South Korea, and Thailand have raised interest rates this year to contain inflation as their economies improve. Their counterparts in the US and Japan by contrast have near-zero rates and are buying assets to inject funds and support growth.

The Monetary Authority of Singapore said last week it will steepen and widen the band in which its dollar trades against a weighted basket of currencies, seeking a "modest and gradual" advance. The Singapore dollar reached $1.2893 versus the greenback after the bi-annual policy review, the strongest level since at least 1981.

Asia's developing economies will expand 9.4 percent in 2010, compared with growth of 2.7 percent in advanced countries, the International Monetary Fund forecast on Oct 6. China's gross domestic product increased 9.5 percent from a year earlier in the third quarter, according to the median estimate of economists surveyed by Bloomberg before an Oct 21 report.

Yuan pressure

The yuan rose to the strongest level since 1993 on Friday on speculation American lawmakers will step up calls for faster appreciation after the US said its trade deficit with China widened to a record $28 billion in August. The US Treasury Department on Oct 15 said its twice-annual report on international currencies, including China's, will be delayed, while citing progress in the acceleration of the yuan's rise. The currency appreciated 0.4 percent last week to 6.6412.

"The political pressure is quite strong," said Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney. "It makes both economic and strategic sense for China to allow a strong currency."

Malaysia's ringgit climbed 0.8 percent to 3.0855 per dollar last week, contributing to this year's 11 percent advance. The currency touched a 13-year high last week, as did Thailand's baht. The baht is Asia's best-performing emerging-market currency of 2010 with a 12 percent gain.

Bloomberg News

(China Daily 10/18/2010 page14)