Yuan appreciation will benefit other Asian currencies
April 13,2010
The won rose five times as fast as China’s currency in the 12 months after officials in Beijing last relaxed the foreign- exchange regime in July 2005, data compiled by Bloomberg show. Singapore’s dollar climbed three times as much, the rupiah five times.
As President Barack Obama pressed Chinese President Hu Jintao in Washington today to let the yuan rise at a faster pace, traders are betting on a repeat of five years ago as an appreciating currency boosts China’s power to buy Malaysian palm oil to Indonesian coal and Indian copper. Revaluation may also enable Asian nations to do the same with their own currencies without damaging exports, while fueling U.S. trade as the global economy emerges from its deepest postwar recession.
“A Chinese appreciation will kick off tightening in the whole Asian complex of currencies,” said Richard Benson, who oversees $14 billion of currency funds as an executive director at Millennium Asset Management in London and is backing the won and the ringgit to lead the gains. “These currencies are fundamentally cheap.”
Obama reaffirmed to Hu his view that it’s “important” for China to move toward a “more market-oriented exchange rate,” Jeff Bader, senior director for Asia at the National Security Council, told reporters after the meeting on the sidelines of a two-day nuclear security summit in the U.S. capital.
Singapore will let its currency advance to keep inflation from accelerating after the economy grew more than anticipated in the first quarter, according to Goldman Sachs Group Inc. The rising cost of imports will also spur Taiwan to let its dollar appreciate, it said. Bank of Tokyo-Mitsubishi UFJ Ltd. said on April 8 the won and rupiah may climb about 13 percent against the yen as central banks from Indonesia to Taiwan raise interest rates and reduce currency intervention.
Twelve-month non-deliverable yuan forwards traded at 6.6255 per dollar in Hong Kong yesterday, reflecting bets the yuan will climb 3 percent from the spot rate of 6.8257, according to data compiled by Bloomberg. The contracts touched 6.6055 on April 9, the strongest since Jan. 19.
The Singapore and Taiwan dollars are the most managed currencies in the region, making them more likely to rise with a yuan revaluation, Stolper said. He added a “buy” recommendation on Taiwan’s dollar versus the greenback on March 31 and on the Singapore dollar April 1.
While the yuan will appreciate between 5 percent and 8 percent a year, other currencies will gain more as investors target countries with less regulation in foreign-exchange markets.
“You’ll see a surge in inflows as investors anticipate an 8 percent move in the yuan,” New York-based Nordvig said. “If you’re an investor, why not make the money now instead of waiting around for a year in China? You’ll see a more immediate impact in Korea, Taiwan, Malaysia and the Philippines.”
South Korea’s won will surge 9.6 percent to 1,025 per dollar, the Singapore dollar 9.1 percent to 1.28 and the Taiwan dollar 5.3 percent to 30 per dollar by the end of March 2011, while the yuan appreciates 6.8 percent to 6.36 per dollar, according to Nomura. China’s currency won’t gain more than 4.9 percent to 6.49 in the next 12 months as the won jumps 6.7 percent and Taiwan’s dollar 5.2 percent, Goldman Sachs forecast. (bloomberg)
April 13,2010
The won rose five times as fast as China’s currency in the 12 months after officials in Beijing last relaxed the foreign- exchange regime in July 2005, data compiled by Bloomberg show. Singapore’s dollar climbed three times as much, the rupiah five times.
As President Barack Obama pressed Chinese President Hu Jintao in Washington today to let the yuan rise at a faster pace, traders are betting on a repeat of five years ago as an appreciating currency boosts China’s power to buy Malaysian palm oil to Indonesian coal and Indian copper. Revaluation may also enable Asian nations to do the same with their own currencies without damaging exports, while fueling U.S. trade as the global economy emerges from its deepest postwar recession.
“A Chinese appreciation will kick off tightening in the whole Asian complex of currencies,” said Richard Benson, who oversees $14 billion of currency funds as an executive director at Millennium Asset Management in London and is backing the won and the ringgit to lead the gains. “These currencies are fundamentally cheap.”
Obama reaffirmed to Hu his view that it’s “important” for China to move toward a “more market-oriented exchange rate,” Jeff Bader, senior director for Asia at the National Security Council, told reporters after the meeting on the sidelines of a two-day nuclear security summit in the U.S. capital.
Singapore will let its currency advance to keep inflation from accelerating after the economy grew more than anticipated in the first quarter, according to Goldman Sachs Group Inc. The rising cost of imports will also spur Taiwan to let its dollar appreciate, it said. Bank of Tokyo-Mitsubishi UFJ Ltd. said on April 8 the won and rupiah may climb about 13 percent against the yen as central banks from Indonesia to Taiwan raise interest rates and reduce currency intervention.
Twelve-month non-deliverable yuan forwards traded at 6.6255 per dollar in Hong Kong yesterday, reflecting bets the yuan will climb 3 percent from the spot rate of 6.8257, according to data compiled by Bloomberg. The contracts touched 6.6055 on April 9, the strongest since Jan. 19.
The Singapore and Taiwan dollars are the most managed currencies in the region, making them more likely to rise with a yuan revaluation, Stolper said. He added a “buy” recommendation on Taiwan’s dollar versus the greenback on March 31 and on the Singapore dollar April 1.
While the yuan will appreciate between 5 percent and 8 percent a year, other currencies will gain more as investors target countries with less regulation in foreign-exchange markets.
“You’ll see a surge in inflows as investors anticipate an 8 percent move in the yuan,” New York-based Nordvig said. “If you’re an investor, why not make the money now instead of waiting around for a year in China? You’ll see a more immediate impact in Korea, Taiwan, Malaysia and the Philippines.”
South Korea’s won will surge 9.6 percent to 1,025 per dollar, the Singapore dollar 9.1 percent to 1.28 and the Taiwan dollar 5.3 percent to 30 per dollar by the end of March 2011, while the yuan appreciates 6.8 percent to 6.36 per dollar, according to Nomura. China’s currency won’t gain more than 4.9 percent to 6.49 in the next 12 months as the won jumps 6.7 percent and Taiwan’s dollar 5.2 percent, Goldman Sachs forecast. (bloomberg)