Ringgit leads emerging currencies advance as China raises fixing

[MUMBAI] Malaysia's ringgit led Asian currency gains after China strengthened the yuan's fixing by the most in seven sessions as appetite holds up for emerging-market assets.

A measure tracking the US dollar halted a six-day advance overnight, lending support to exchange rates in less-developed nations before Friday's jobs data, which may provide greater insight as to when the Federal Reserve is likely to make its next move to hike interest rates.

With Brent crude up about 48 per cent from January's 12-year low, a gauge of emerging currencies headed for the best quarter in four years and an equivalent stocks index was set for the biggest three-month gain since June 2014.

"The main reasons boosting Asian currencies are the stronger yuan fixing and a weaker dollar,'' said Divya Devesh, the Singapore-based foreign-exchange strategist for Asia at Standard Chartered Plc.

"Commodities might only be helping at the margin.''

South Korea and Taiwan have alone lured more than US$7 billion to shares this month and eyes will be on their biggest trading partner China as it reports manufacturing and services data this week, another key event to assess whether rallies in emerging nations can be sustained.

Overseas investors' purchases of Malaysian stocks are already the highest this month since April 2013, according to a research note from MIDF Investment Bank.

Currencies

The ringgit climbed 0.5 per cent to 3.9960 per US dollar as of 11 am in Kuala Lumpur and the won appreciated 0.3 per cent to 1,162.61 in Seoul.

A Bloomberg measure tracking 20 developing nation currencies was little changed and is up 2.3 per cent this quarter.

Stocks

The Malaysia FTSE Bursa Malaysia KLCI Index climbed 0.6 per cent to 1,712.67 in Kuala Lumpur, its biggest gain since March 18. Foreign funds bought a net RM1.37 billion (S$469 million) of equities last week, taking purchases this month to RM5 billion as of March 25, Zulkifli Hamzah, analyst at MIDF Investment Bank, wrote in report Monday.

In the week to March 23, developing markets attracted inflows for a fourth week, with the latest figure of US$2.7 billion the most in eight months, Kenneth Chan, a quantitative strategist at Jefferies Hong Kong Ltd, wrote in a note.

The MSCI Emerging Markets stock index rose 0.1 per cent on Tuesday to 814.14, and is up 2.5 per cent this quarter.

Bonds

Korea's three-year government bond yield fell to the lowest level in almost six weeks on speculation new board members named by the central bank will favor cutting interest rates further from a record. The four new candidates announced by the Bank of Korea on Monday need to be approved by President Park Geun Hye and will replace policy makers whose terms on the seven-member board end on April 20.

The yield on three-year notes fell four basis points to 1.45 per cent, the lowest since Feb 17, Korea Exchange prices show. The yield on notes maturing in Dec 2025 dropped three basis points to 1.81 per cent.

BLOOMBERG