EMERGING FX
Asian currencies rise; Singapore dollar at 10-year highs
Reuters
First Posted 11:45:00 01/25/2008
SINGAPORE -- Asian currencies extended gains for a third day on Friday, riding on improving risk appetite after an aggressive US rate cut, with the Singapore dollar and Malaysian ringgit hitting their highest levels in a decade.
Both the Singapore dollar and ringgit are tightly linked by trade ties and they led the region along with the Philippine peso, with more than 0.6 percent increases each. That was followed closely by the Indonesian rupiah with a 0.4 percent rise.
The broad appreciation in Asia was due to firm global equity markets, which in turn were buoyed up by several factors including strong corporate sentiment in Germany and a return of some confidence in the U.S economy after solid employment data and a congressional fiscal package.
The Bush administration's fiscal package includes $150 billion of tax rebates and business incentives meant to prevent a slowdown in the country's economy.
MSCI's measure of Asian equities excluding Japan gained 3.1 percent, after overnight gains in the Dow Jones index.
"Market optimism is being helped by a combination of better European data, stronger US employment data and the details of the Bush administration fiscal stimulus plan,"
JPMorgan said in a note.
The Singapore dollar rose by 0.6 percent to hit a 10-1/2-year high at 1.4233 per dollar on strong inflows as investors bought local assets.
"Investors are looking for a stable growth environment ... and approval from China for investment in Singapore shares is also boosting sentiment," a trader in
Singapore said.
Expectation that the central bank will allow faster currency appreciation due to a high consumer price inflation prompted the rise, coupled with Beijing's move on Wednesday when it signed a memorandum of understanding with Singapore allowing approved banks to invest their clients' money in the city-state.
The trader said the Singapore dollar is expected to test levels on the stronger side of 1.4 per dollar in the medium term.
The ringgit rose by 0.9 percent to hit a decade high at 3.2350 per dollar as local stocks rose by 1.4 percent.
"Money is coming into the market to buy local stocks and bonds," said a trader in Kuala Lumpur.
The Philippine peso rose by 0.6 percent to 40.97, a faster pace than Thursday's 0.5 percent rise, while the rupiah held steady at Friday's high of 9,337 per dollar.
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