Asia Currencies Head for Best Quarter Since 2004, Led by Rupiah

Asia Currencies Head for Best Quarter Since 2004, Led by Rupiah

June 30 (Bloomberg) -- Asian currencies headed for their biggest quarterly gain since 2004, led by Indonesia’s rupiah and South Korea’s won, as optimism the global economic slump is easing fueled demand for emerging-market assets.

The rupiah extended a quarterly winning streak that started in April 2008 on optimism President Susilo Bambang Yudhoyono will win re-election next month and introduce policies to support growth in Southeast Asia’s largest economy. The won gained as the Kospi Index of equities headed for its best quarter in two years. Crude and palm oil prices rose, boosting the outlook for commodity exporters including Malaysia.

“Most countries are moving along with a refreshing recovery trend that should be good for markets,” said Yeo Chin Tiong, head of treasury at OSK Investmnent Bank Bhd. in Kuala Lumpur. “The economies are chugging along, not fantastic, but stock and currency markets are trading on feel-good sentiment.”

The rupiah strengthened 0.6 percent to 10,210 per dollar as of 9 a.m. in Jakarta, taking its three-month rally to 14.6 percent, according to data compiled by Bloomberg. The won rose 0.5 percent 1,279.60 for an 8.1 percent gain since March 31. The ringgit added 3.5 percent in the quarter to 3.5220, and Taiwan’s dollar climbed 3.3 percent to NT$32.857.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active regional currencies, rose almost 2.8 percent this quarter, the most since 2004. Investors ploughed a net $17.8 billion this year into eight Asian stock markets outside Japan, according Bloomberg data. The MSCI Asia Pacific index of regional stocks rallied 29 percent since the end of March.

Korean Confidence

The dollar weakened 0.2 percent to 95.89 yen and fell for a fourth day against the euro to $1.4115 as investors sought higher-yielding assets. The ICE’s Dollar Index, which tracks the currency against its six major rivals, declined 6.7 percent this quarter as demand for higher yields erodes the dollar’s safe- haven appeal.

The won was poised for its biggest quarterly gain in four years as local manufacturers turned less bearish in their business outlook.

An index measuring expectations for July advanced to 78 from 76 in June, based on a survey of 1,445 producers. The index reached 44 in January, the lowest since the series began in 1991. A score of less than 100 means pessimists outnumber optimists.

“Confidence numbers have picked up certainly, but they’re not yet being matched by real activity,” said Patrick Bennett, Hong Kong-based currency strategist at Societe Generale SA. “Some of the confidence priced into equities is prone to be unwound.”

Commodity Prices

The ringgit strengthened by the most in almost three weeks as stocks rallied and commodity prices extended gains, brightening the outlook for exports.

Higher prices for palm and crude oil, which together account for 10 percent of Malaysia’s exports, may help bring an end to a seven-month drop in overseas sales. Prime Minister Najib Razak may unveil incentives to attract funds from abroad when he opens a two-day investment conference in Kuala Lumpur today, according to a report from HwangDBS Vickers Research Sdn. yesterday. Read Article... http://www.bloomberg.com/apps/news?pid=20601087&sid=aW.mLODOHEXI