Asia Currencies: Ringgit, Peso Lead Weekly Gains as Slump Eases

Source: Lilian Karunungan (Bloomberg)

Aug. 8 (Bloomberg) -- Asian currencies rose this week, led by the Malaysian ringgit and the Philippine peso, as signs a global economic recovery is gathering pace bolstered demand for emerging-market assets.

The ringgit reached a two-month high against the dollar and the peso had its best week since May after reports showed manufacturing picked up last month in the U.S., Europe and China. Indonesia’s rupiah climbed to its strongest level in nine months before paring gains amid concern the central bank will combat appreciation to support exporters.

“Risk assets such as Asian currencies could rally further,” said Craig Chan, a Singapore-base strategist at Nomura Holdings Inc., Japan’s largest brokerage. “The momentum that has been built up in the market has been strong. There’s been very good numbers” from economic data.

The ringgit climbed 0.3 percent this week to 3.5065 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.4840 on Aug. 5, the highest since June 3. The peso advanced 0.7 percent to 47.755 and the rupiah was little changed at 9,965. The Indonesian currency reached 9,850 on Aug. 4, its strongest level since October.

The U.S. Institute for Supply Management’s factory gauge and a Markit Economics index of euro-area manufacturing activity both rose to 11-month highs in July, based on separate surveys of purchasing managers in the two economies. The indicators stayed below 50, signaling contractions. Surveys published this month in China, the world’s third-largest economy, showed factory output there expanded for at least a fourth month.

Maxis IPO

Malaysia’s government said on Aug. 6 there are “some signs of recovery” in electronics, the nation’s biggest export, after reporting that a slump in overseas shipments slowed in June.

The ringgit rose for a fourth week, the longest winning streak since early April. The Kuala Lumpur Composite Index of shares rallied to the highest level since June 2008 as mobile- phone operator Maxis Communications Bhd. prepares for what may be a record stock offering for Malaysia.

“The main driving factor for the ringgit is the stock inflows” given the improving economic outlook, said Azmi Shukri Rahman, a currency trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “The new IPO should attract overseas funds in the medium term.”

Malaysian exports fell 22.6 percent from a year earlier, following a 30 percent drop in May, the trade ministry said on Aug. 5. Electronics manufacturers have seen “a slight pickup in orders so there’s a good sign,” Trade Minister Mustapa Mohamed told reporters in Singapore this week.


Global Recovery

The peso strengthened after JPMorgan Chase & Co. forecast remittances from overseas workers, which account for 10 percent of the economy, will increase 2 percent this year, revising a prior prediction for a 12 percent drop.

“The overall picture is a stronger peso because of the optimism on the global recovery,” said Alan Cayetano, a senior trader at Metropolitan Bank & Trust Co. in Manila. “There’s been a steady stream of positive data and good corporate earnings in the U.S. that has fueled momentum for investors to take on risk trades.”

Overseas investors bought more Indonesian stocks than they sold on all but one of the last 16 days, lured by the fastest economic expansion in Southeast Asia. Bank Indonesia said yesterday it wants “stability” in the rupiah, noting that asset appreciation this year has been spurred by inflows of $4 billion from abroad.

Intervention Risk

“Foreigners like Indonesia’s positive economic growth,” said Esther Chandra, a currency dealer at PT Bank Pan Indonesia in Jakarta. “But Bank Indonesia is also watching very closely and checking markets very frequently as they don’t want the rupiah to appreciate too fast.”

Concern about central bank intervention was also cited by traders as a factor limiting gains this week in the Korean won, the Taiwan dollar and the Thai baht.

The won rose 0.3 percent this week to 1,224.90 versus the greenback, the Taiwan dollar gained 0.1 percent to NT$32.792 and the Thai baht traded at 33.94 compared with 34.01 on July 31. The Singapore dollar rose 0.2 percent to S$1.4373.