Asian currencies strengthened, led by South Korea’s won, as speculation the International Monetary Fund will help Italy reduced concern Europe’s debt crisis will slow global growth and boosted demand for emerging-market assets.
The MSCI Asia-Pacific Index (MXAP) of shares rose by the most in three weeks after Italian newspaper La Stampa reported yesterday, without saying where it got the information, that the IMF is preparing a 600 billion euro ($799 billion) loan for Italy. Data showed Thanksgiving retail sales in the U.S. jumped to a record, while a report on Dec. 1 will show South Korean exports increased at a faster pace in November than the previous month, according to a Bloomberg survey.
“With speculation of support by the IMF, risk sentiment is temporarily improving,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Asia’s economy remains solid and better than other regions, and so when the risk appetite is improving, Asia’s assets and currencies get support.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, added 0.2 percent to 114.73 as of 10:33 a.m. in Hong Kong. The won climbed 1 percent to 1,152.90 per dollar and Thailand’s baht gained 0.4 percent to 31.30, according to data compiled by Bloomberg. The Philippine peso rose 0.3 percent to 43.80 and the Taiwan dollar advanced 0.2 percent to NT$30.408.
Export-Led Economy
As of Nov. 17, the Washington-based IMF had about $390 billion available for lending, which Managing Director Christine Lagarde has said may not suffice to meet loan demand if the global outlook worsens.
The won snapped a six-day decline as the 16 percent increase in sales over Thanksgiving improved the outlook for Korean exports. Overseas shipments, which account for about a half of Korea’s economy, rose 11.6 percent in November from a year earlier after increasing a revised 8 percent the previous month, according to the median forecast of economists surveyed by Bloomberg.
“The euro gained on the IMF’s Italy loan plan report, and this is supporting Asian currencies,” said Yun Se Min, a Seoul- based currency trader at Busan Bank. “Investors are reacting to the U.S sales data as well since increasing consumption is good news for Korea’s export-oriented economy.”
The Philippine peso halted a three-day slide on speculation the government will increase spending to boost domestic growth. A report today showed the nation’s economy grew 3.2 percent in the third quarter, compared with a revised 3.1 percent pace in the preceding three months and below the 4.1 percent forecast by economists surveyed by Bloomberg.
‘Improved Sentiment’
“Speculation that the IMF is preparing a bailout of Italy is likely to lead to improved sentiment in Asia but it remains to be seen how lasting its potential impact on the market mood will be,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. The yuan declined to near its weakest level in a month on speculation China will slow the pace of appreciation to protect its exporters as inflation cools.
The country’s consumer-price gains are expected to slow more in the last two months of this year, Shanghai Securities News reported today, citing Yu Bin, a researcher from the State Council’s Development Research Center. The yuan may be “near its equilibrium level” following its recent depreciation and a decline in foreign-exchange reserves, Li Yang, a former central bank adviser, said on Nov. 26.
Chinese Inflation Easing
“There is less need for China to strengthen the yuan to lower import prices as inflation is easing,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest lender. “The worsening economic outlook may also steer officials toward protecting exports.”
The yuan fell 0.02 percent to 6.3761 per dollar after being down as much as 0.13 percent earlier, according to the China Foreign Exchange Trade System. The currency touched 6.3848 on Nov. 25, the weakest level since Oct. 21.
Elsewhere, Indonesia’s rupiah dropped 1 percent to 9,146 per dollar, according to prices from local banks compiled by Bloomberg. Onshore financial markets in Malaysia are closed for a public holiday.