Asian currencies rise as central banks seek to curb inflation
July 22,2010
South Korea’s won and Malaysia’s ringgit halted a three-day loss to lead gains in Asian currencies on speculation regional central banks will let their exchange rates strengthen to contain inflation.
Policy makers in the region should allow more currency appreciation to help cope with capital inflows and enable a more gradual pace of interest-rate increases that can support economic growth, the Asian Development Bank said today. The ringgit climbed from a two-week low before a government report tomorrow that may show consumer prices rose last month by the most in more than a year, according to a Bloomberg survey.
“Central banks probably have no choice but to allow currency appreciation amid inflationary pressure and fund inflows into the region where interest rates are rising,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Regional currencies will remain under appreciation pressure as Asia is in a cycle of rate hikes and its growth is outpacing other regions.”
South Korea’s won advanced 0.8 percent to 1,205.71 per dollar as of 3 p.m. in Seoul, according to data compiled by Bloomberg. The ringgit gained 0.5 percent to 3.2135 and is up 6.5 percent this year, the best performer in Asia outside Japan. Singapore’s dollar rose 0.3 percent to S$1.3727.
Malaysia’s inflation accelerated to 1.7 percent in June, according to the median forecast in Bloomberg’s survey, the fastest pace since May 2009. Singapore may say on July 23 that prices in the city-state climbed 3.5 percent, the quickest rate of increase since January last year, a separate survey showed.
‘Unwind’ Stimulus
Central banks in Malaysia, India, Taiwan, South Korea and Thailand have all raised borrowing costs this year as the region leads the global economic recovery. Bank Negara Malaysia lifted its overnight policy rate by a quarter-percentage point to 2.75 percent on July 8 and the Bank of Korea followed a day later with a quarter-point increase to 2.25 percent.
“The market believes the ringgit can still strengthen by end of the year with inflation picking up a bit,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Group Holdings Bhd. in Kuala Lumpur. “It seems well supported following recent dips.”
Asia faces the risk of volatile capital flows as its growth outpaces the rest of the world, the ADB said. Developing Asia will probably expand 7.9 percent in 2010, compared with an April estimate of 7.5 percent, the Manila-based lender said in a statement accompanying the release of its Asia Economic Monitor report today.
“It is better to unwind monetary stimulus through a judicious mix of currency appreciation and interest-rate adjustments rather than entirely through policy rate hikes,” the ADB said. “This strategy would be able to support domestic demand, address inflationary pressures and help facilitate global rebalancing.”
Elsewhere, the Indonesian rupiah climbed 0.1 percent to 9,058 per dollar. Thailand’s currency traded at 32.29 from 32.28 yesterday, and the Taiwan dollar was unchanged at NT$32.155. India’s rupee slid 0.1 percent to 47.1725 per dollar.
July 22,2010
South Korea’s won and Malaysia’s ringgit halted a three-day loss to lead gains in Asian currencies on speculation regional central banks will let their exchange rates strengthen to contain inflation.
Policy makers in the region should allow more currency appreciation to help cope with capital inflows and enable a more gradual pace of interest-rate increases that can support economic growth, the Asian Development Bank said today. The ringgit climbed from a two-week low before a government report tomorrow that may show consumer prices rose last month by the most in more than a year, according to a Bloomberg survey.
“Central banks probably have no choice but to allow currency appreciation amid inflationary pressure and fund inflows into the region where interest rates are rising,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Regional currencies will remain under appreciation pressure as Asia is in a cycle of rate hikes and its growth is outpacing other regions.”
South Korea’s won advanced 0.8 percent to 1,205.71 per dollar as of 3 p.m. in Seoul, according to data compiled by Bloomberg. The ringgit gained 0.5 percent to 3.2135 and is up 6.5 percent this year, the best performer in Asia outside Japan. Singapore’s dollar rose 0.3 percent to S$1.3727.
Malaysia’s inflation accelerated to 1.7 percent in June, according to the median forecast in Bloomberg’s survey, the fastest pace since May 2009. Singapore may say on July 23 that prices in the city-state climbed 3.5 percent, the quickest rate of increase since January last year, a separate survey showed.
‘Unwind’ Stimulus
Central banks in Malaysia, India, Taiwan, South Korea and Thailand have all raised borrowing costs this year as the region leads the global economic recovery. Bank Negara Malaysia lifted its overnight policy rate by a quarter-percentage point to 2.75 percent on July 8 and the Bank of Korea followed a day later with a quarter-point increase to 2.25 percent.
“The market believes the ringgit can still strengthen by end of the year with inflation picking up a bit,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Group Holdings Bhd. in Kuala Lumpur. “It seems well supported following recent dips.”
Asia faces the risk of volatile capital flows as its growth outpaces the rest of the world, the ADB said. Developing Asia will probably expand 7.9 percent in 2010, compared with an April estimate of 7.5 percent, the Manila-based lender said in a statement accompanying the release of its Asia Economic Monitor report today.
“It is better to unwind monetary stimulus through a judicious mix of currency appreciation and interest-rate adjustments rather than entirely through policy rate hikes,” the ADB said. “This strategy would be able to support domestic demand, address inflationary pressures and help facilitate global rebalancing.”
Elsewhere, the Indonesian rupiah climbed 0.1 percent to 9,058 per dollar. Thailand’s currency traded at 32.29 from 32.28 yesterday, and the Taiwan dollar was unchanged at NT$32.155. India’s rupee slid 0.1 percent to 47.1725 per dollar.