Bloomberg
Asian currencies advanced for a second week amid signs China will allow the yuan to resume appreciation and on optimism monetary easing in Europe will spur fund flows into higher-yielding assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.1% in the past five days after the European Central Bank cut its deposit rate last week to minus 0.1%. The yuan had its best five-day gain since 2011 as the People’s Bank of China boosted its reference rate by 0.19% since June 6, the most since December, to 6.1503 per dollar.
“When the ECB started the ball rolling with negative rates, that accentuated the search for carry and that has brought some of the flows into Asia,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd in Singapore. “China has started appreciating its currency after a prolonged period where the yuan was depreciating.”
The yuan rose 0.6% from June 6 to 6.2107 per dollar on Friday in Shanghai, according to China Foreign Exchange Trade System prices. The Indonesian rupiah climbed 0.3% to 11,795, Thailand’s baht advanced 0.2% to 32.415 and South Korea’s won strengthened 0.3% to 1,017.88.
Overseas investors pumped a net $995.3mn into stock markets in India, South Korea and Taiwan this week, data compiled by Bloomberg show. They added $1.21bn to holdings of bonds in India and Thailand.
The yuan touched a two-month high of 6.2018 per dollar on Friday on speculation the central bank will tolerate gains after the nation’s trade surplus widened. The US-China Strategic and Economic Dialogue will be held in Beijing in early July.
Exports climbed 7% from a year earlier in May, official data showed on June 8, compared with growth of 0.9% in the previous month and the median estimate of a 6.7% gain in a Bloomberg survey. That left a trade surplus of $35.9bn, almost double the figure for April, as imports unexpectedly fell 1.6%.
“Our view is that better economic data and international diplomacy are at play here,” Bank of America Merrill Lynch strategists including Claudio Piron in Singapore and Albert Leung in Hong Kong wrote in a research note yesterday. The stronger yuan fixings “are consistent with some stabilisation in macro data,” they said.
The won touched 1,015.25 per dollar on June 10, the highest since August 2008, data compiled by Bloomberg show.
The Bank of Korea left its benchmark interest rate at 2.5% for a 13th straight month on June 12 and governor Lee Ju Yeol said a strong currency hurts the economy, while lowering inflationary pressure.
Elsewhere in Asia, Taiwan’s dollar rose 0.1% from a week ago to NT$30.053 against its US counterpart. Malaysia’s ringgit fell 0.2% to 3.2185, the Philippine peso dropped 0.3% to 43.78 and the Indian rupee weakened 1% to 59.7725.