Singapore leads gains in Asian currencies after revaluation

Singapore’s dollar led gains in most Asian currencies as the city-state’s central bank said it would allow faster appreciation to combat inflation after its economy grew quicker than economists forecast.

 

The Monetary Authority of Singapore said it will re-center the currency’s band upwards, after gross domestic product increased at an annualized rate of 23.5% in the first quarter from the previous three months, more than double the 11.4% predicted in a Bloomberg survey of economists.

 

“There’s been a lot of bullish trade riding on the back of the Singapore policy review,” said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank in Kuala Lumpur. “The market is left to guess where the mid-point of the Singapore currency band is, so any upside will likely be limited.”

 

The Singapore dollar jumped 0.5% to 1.2492 per dollar as of 12:08 p.m. local time, according to data compiled by Bloomberg. The Taiwan dollar rose 0.3% to NT$28.990 ($1.249) and Indonesia’s rupiah gained 0.1% to 8,655.

 

Taiwan’s dollar strengthened for a second day on speculation exporters are converting their earnings to take advantage of the currency’s recent weakness.

 

“We see this as a temporary strengthening in the Taiwan dollar,” said Suan Teck Kin, an economist at United Overseas Bank in Singapore. “You have these export earnings being converted into Taiwan dollars.”

 

CHINESE INFLATION

China’s yuan traded near its strongest level in 17 years on speculation the central bank will tighten monetary policy further to tame inflation. The currency was little changed at 6.5339 per dollar.

 

Policy makers will likely ask banks to set aside more cash as reserves in the “near future,” the China Securities Journal said in a front-page commentary. A government report tomorrow will show the consumer price index rose 5.2% in March from a year earlier, the most since July 2008, according to the median estimate of economists surveyed by Bloomberg.

 

The government will also report tomorrow that gross domestic product rose 9.4% from a year earlier last quarter, after increasing 9.8% in the previous three months, according to another Bloomberg survey.

 

“GDP growth is still going to be strong and price pressures remain,” said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group “China will respond by tightening policy with a combination of stronger currency, hikes in interest rates and the reserve ratio.”

 

South Korea’s won declined on speculation policy makers will step in to restrain the currency if it rises to the 1,080 per dollar level. The currency fell 0.1% to 1089.10 per dollar, touching 1,085.50 earlier, the strongest level since April 11.

 

Elsewhere, Malaysia’s ringgit and the Philippine peso were little changed at 3.0240 and 43.247, respectively, according to data compiled by Bloomberg. India and Thailand’s financial markets are closed for holidays.