By Bob Chen and David Yong
April 4 (Bloomberg) -- Asian currencies rose for a fifth week, the longest winning streak since October 2007, after Group of 20 leaders pledged more than $1 trillion to help combat a global recession.
Eight of the 10 most-active Asian currencies outside Japan advanced in the week after economic reports in China, the U.S. and the U.K. fuelled speculation that demand for regional exports will strengthen. The Bloomberg-JPMorgan Asia Dollar Index, which tracks their performance, touched a two-month high on April 2 as regional stocks rallied.
“The G-20 initiatives have injected positive sentiment into stocks and currencies in the region,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “It would be tough to get another massive set of news to support further gains.”
The South Korean won advanced 0.6 percent this week to 1,341.50 per dollar, according to data compiled by Bloomberg. The Malaysian ringgit strengthened 1 percent to 3.5803 and Taiwan’s dollar climbed 1.2 percent to NT$33.38.
G-20 leaders agreed to boost the resources of the International Monetary Fund and offered cash to revive trade. Reports this week showed China’s manufacturing expanded in March for the first time in six months and U.K. house prices rose in March for the first time since October 2007. U.S. sales of existing homes increased 2.1 percent in February, better than the zero change forecast by economists in a Bloomberg survey.
The yen yesterday weakened to above 100 per dollar for the first time in five months as the G-20 pledge sapped demand for Japan’s currency as a refuge. It ended the week at 100.31 in New York. The MSCI Asia-Pacific Index of regional equities climbed 1.4 percent during the week.
The won fell yesterday, paring this week’s gains, after the government said it’s premature to be optimistic on the outlook for Asia’s fourth-biggest economy. Korea’s Kospi index of shares climbed 3.7 percent this week as overseas investors bought more local stocks than they sold on each of the last three days.
“The extension of a rally in global stocks is raising optimism that the worst of the crisis may be behind us now,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “There are dollar supplies from both onshore and offshore players as foreign investors continue to buy shares.”
The ringgit advanced for a fourth week, its best winning streak in a year. It pared its gains yesterday after a government report showed exports tumbled for a fifth month in February, after plunging the most in 15 years the previous month.
G-20 leaders agreed to put another $500 billion into the International Monetary Fund’s war chest to help troubled economies, and allowed the agency to create $250 billion of special drawing rights, its reserve currency.
The expansion may help boost emerging-market currencies, said Johanna Chua, head of Asia-Pacific economics research at Citigroup.
“I don’t think this has any direct implication on the U.S. dollar,” she said. “But every time you beef up the resources of an institution whose natural inclination is to help emerging markets, it’s net-net positive.”
Taiwan’s dollar touched an 11-week high on April 2 before paring its advance on reported intervention. The Central Bank of the Republic of China (Taiwan) bought at least $1.2 billion of U.S. dollars on April 2 to counter foreign investors’ and local corporations’ purchases of the Taiwanese currency, the Taipei- based Economic Daily said yesterday.
“Risk appetite, the stocks rally, and the positive news from the G-20 summit should all be supportive to regional currencies,” said David Cohen, director of Asia economic forecasting at Action Economics in Singapore. “The central bank could probably tolerate the gains a bit longer as long as global demand is picking up, which is good news for exports.”
Elsewhere, the Singapore dollar climbed 0.6 percent this week to S$1.5051, Indonesia’s rupiah rose 0.2 percent to 11,475 and the Philippine peso gained 0.4 percent to 47.862.
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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