Asian currencies had a fourth weekly gain, the longest winning streak since September, on optimism the global economy is recovering. China’s economic growth accelerated for the first time in two years, with industrial output picking up, according to government figures released yesterday. Housing starts in the US, the world’s largest economy, topped estimates and applications for jobless benefits declined, reports showed on January 17.
“There's a lot of risk-on sentiment after US data came in stronger than expected,” said Vishnu Varathan, a Singapore- based economist at Mizuho Corporate Bank Ltd. The pickup in China's economy “is also helping Asian currencies,” he said. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, advanced 0.2 per cent this week. The gauge reached a 16-month high yesterday. India’s rupee led gains, climbing 1.9 per cent to 53.7050 a dollar, according to data compiled by Bloomberg. Thailand’s baht appreciated 1.8 per cent to 29.74, while Malaysia’s ringgit rose 0.3 per cent to 3.0103.
China’s gross domestic product increased 7.9 per cent in the fourth quarter from a year earlier, after a 7.4 per cent gain in the previous three months. Housing starts in the US climbed 12.1 per cent last month to a 954,000 annual rate, exceeding all 84 estimates in a Bloomberg survey.
‘Bottoming out’
“Global economic activity is finally bottoming out, while tail risk has diminished,” Credit Agricole CIB analysts led by Hong Kong-based Mitul Kotecha wrote in a report released yesterday. “While there is still plenty of event risk, ultra- easy monetary policy, progress in Europe and a pickup in Chinese growth mean that markets can breathe a sigh of relief.”
The baht completed its biggest weekly advance since 2011 and touched a 17-month high of 29.72 a dollar on January 17, as global funds favoured higher-yielding assets. Overseas investors bought $1 billion more of sovereign debt than they sold in the four days to January 17, boosting net purchases for the month to $2.6 billion, and pumped $125 million into the nation’s equities, Thai Bond Market Association and stock exchange data show.
Finance Minister Kittiratt Na-Ranong said on January 17 exporters will face difficulties if the baht strengthens further. The government's 10-year bond yield of 3.72 per cent compares with 1.86 per cent in the US and 0.75 per cent in Japan.
| CURRENCY PER DOLLAR | |||
| Jan 11,’13 | Jan 18,’13 | % change | |
| Indian rupee | 54.763 | 53.706 | 1.93 |
| Thai baht | 30.270 | 29.760 | 1.68 |
| Indonesian rupiah | 9866.000 | 9828.000 | 0.39 |
| Malaysian ringgit | 3.021 | 3.011 | 0.33 |
| Taiwan dollar | 28.953 | 28.948 | 0.02 |
| Hong Kong dollar | 7.752 | 7.753 | -0.01 |
| Chinese renminbi | 6.216 | 6.218 | -0.04 |
| Singapore dollar | 1.225 | 1.228 | -0.22 |
| Korean won | 1054.690 | 1057.080 | -0.23 |
| Australian dollar | 0.949 | 0.951 | -0.23 |
| Japanese yen | 89.180 | 90.100 | -1.03 |
| Compiled by BS Research Bureau Source: Bloomberg | |||
Smoothing operations
“Funds are flowing into the whole of Asia, especially Southeast Asia, and Thailand is one of the most attractive places,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “It’s possible to see smoothing operations to slow the pace of the appreciation, but they may not aggressively intervene to weaken the baht.”
The rupee rose to an 11-week high yesterday after the government allowed state refiners to gradually increase diesel prices, a move that may help rein in energy subsidies and shore up public finances.
Finance Minister Palaniappan Chidambaram is seeking to cut spending on subsidies, as part of a plan to narrow the budget deficit to 5.3 per cent of gross domestic product and avoid a downgrade in the sovereign debt rating.
