Most Asian currencies strengthened this week, with the Thai baht climbing to a five-month high, as upbeat US economic data and monetary easing in China spurred demand for riskier assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.1 percent, and the MSCI Asia Pacific Index of shares climbed to a six-month high. Demand for higher-yielding assets was also buoyed by European leaders’ approval of a second bailout for Greece on Tuesday. Chinese banks’ reserve requirements were relaxed on Friday for the second time in three months.
“Good data out of the US leads to speculation external demand will improve, and that’s good for export-oriented economies like Malaysia and Thailand,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc in Tokyo. “Fund inflows are supporting the currencies. Risk sentiment is also good after agreement was reached on Greece bailout.”
The New Taiwan dollar snapped a three-day decline on Friday on optimism an economic recovery in the US would boost exports and spur growth. Friday’s 0.1 percent gain helped the NT dollar close the week little changed at NT$29.582, from the previous week’s NT$29.583.
The Taiwanese currency may gain as the nation’s “growth outlook appears brighter now,” Wai Ho Leong and Joey Chew, Singapore- based analysts at Barclays Capital, wrote in a research note. “The improvement in US economic indicators is finally filtering down to Taiwan.”
The baht advanced 1.3 percent this week to 30.38 per US dollar in Bangkok, according to data compiled by Bloomberg. Malaysia’s ringgit climbed 0.8 percent to 3.0138 and India’s rupee gained 0.7 percent to 48.9450. China’s yuan strengthened 0.02 percent to 6.2978.
Stock markets in South Korea, India and the Philippines attracted US$1.4 billion from overseas this week, according to the latest exchange data. In Thailand, global funds boosted their holdings of shares by US$264 million and pumped US$457 million more into government bonds, official figures show.
“Inflows into debt are boosting the rupee,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd in Mumbai. “Sentiment is positive, and equity flows are supportive too.”
Indonesia’s rupiah declined for a third week, weakening 0.8 percent to 9,118 per US dollar, amid concern government plans to raise fuel prices would stoke inflation. Foreign investors trimmed their holding of local-currency government bonds 1.7 percent this month through Feb. 20 to 232 trillion rupiah, according to finance ministry statistics.
Elsewhere, the Singapore dollar rose 0.2 percent to S$1.2552 versus the greenback, while the South Korean won was little changed at NT$29.582.
The Philippine peso slid 0.5 percent to 42.825.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
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