Won leads Asia currency gains as U.S. data spurs risk appetite

South Korea’s won led gains in Asian currencies after a gauge of U.S. manufacturing exceeded projections, brightening the outlook for regional exports and boosting demand for riskier assets.

Seven of Asia’s 10 most traded currencies outside Japan gained against the dollar after the Institute for Supply Management’s factory index rose to a three-year high. A report showing South Korea’s foreign-exchange reserves increased to a 19-month high in October also supported the won.

“The ISM shows continued gains in U.S. output into the fourth quarter,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “That’s favorable for risk appetite and assets such as Asian currencies because it confirms recovery in the world’s biggest economy.”

The won rose 0.5 percent to 1,176.87 per dollar as of 11:20 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,175.90, the strongest level since Oct. 21. Malaysia’s ringgit strengthened 0.4 percent to 3.4145, Taiwan’s dollar gained 0.2 percent to NT$32.5 and the Singapore dollar increased 0.2 percent to S$1.3972.

The ISM’s factory index rose to 55.7, according to data released yesterday. Readings above 50 signal expansion. Separate reports showed construction spending in the U.S. rose the most in a year in September and sales of previously owned homes climbed for an eighth straight month.

South Korea’s foreign-exchange reserves advanced to $264.2 billion last month from $254.3 billion in September, the Bank of Korea said in an e-mailed statement today.

“The central bank was trying to smooth the appreciation,” said Kowalczyk. Central banks intervene in the currency markets by arranging purchases or sales of foreign exchange.

Malaysian Ringgit

Malaysia’s ringgit gained on speculation exporters were repatriating overseas income, anticipating further declines in the dollar.

“The recovery is regaining some momentum with the latest U.S. economic data,” said Ahmad Zubaidi Samse, a currency trader at Bank Muamalat Malaysia Bhd. in Kuala Lumpur. “We see some exporters hedging their dollar earnings as the market expects to see a lower dollar.”

Malaysia shipped $39 billion worth of goods to the U.S. in the first eight months of this year, equivalent to 11 percent of total exports. Only Singapore and China accounted for bigger shares of Malaysia’s overseas sales.

Taiwan Dollar

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.1 percent, as investors sought higher-yielding assets.

Funds based abroad bought $11.3 billion more Taiwan shares than they sold this year, lifting the Taiex stock index 60 percent and the Taiwan dollar 1 percent.

“The Taiwan dollar is following stocks,” said Yang Kung- yi, a currency trader at Shanghai Commercial & Savings Bank in Taipei. “The local currency is also moving in accordance with how the U.S. dollar does in the international market.”

Taiwan’s exports fell at the slowest pace in 13 months in October, according to a Bloomberg survey before a finance ministry report on Nov. 9. Exports, equivalent to about two- thirds of Taiwan’s gross domestic product, fell 7.2 percent in October from a year earlier, after declining 13 percent in September, according to the median estimate of seven economists in a Bloomberg survey.

Elsewhere, Indonesia’s rupiah climbed 0.2 percent to 9,545, and the Thai baht rose 0.1 percent to 33.42. China’s yuan was little changed at 6.8276 versus 6.8279 yesterday. The Philippine peso declined 0.2 percent to 47.695 versus the greenback.


Source: bloomberg.com

Publication date: 11/3/2009

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