Asian currencies rebound as global stocks rally boosts sentiment

[KUALA LUMPUR] A rebound in global equities spurred demand for Asian currencies, with the Malaysian ringgit and Indonesia's rupiah rising from 17-year lows.

A recovery in Chinese shares and weekend comments from central bank Governor Zhou Xiaochuan that a rout in the nation's stocks is almost over helped boost sentiment, reducing appetite overnight for the relative safety of the dollar. Currencies of commodity-producing countries such as Malaysia also climbed as a measure of raw materials rose for a second day.

"The dollar was a little bit softer overnight," said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia.

"The Chinese market is a little bit firmer and that helps as well."

South Korea's won advanced from a five-year low and the Thai baht rallied from its weakest level in six years as the Bloomberg Dollar Spot Index dropped 0.4 per cent overnight. The MSCI Asia-Pacific Index of shares rose 4.4 per cent, its biggest gain since 2009.

The ringgit snapped a five-day loss as Brent crude extended its rebound to 14 per cent over the past two weeks. The currency is the worst performing in Asia over the past 12 months as the price of the commodity halved amid a global supply glut. Malaysia, which is the region's only major net oil exporter, has also been hurt by slowing economic growth in China, a looming US interest-rate increase and a domestic political scandal.

The Bloomberg Commodity Index, which includes crude, took its two-day gain to 1.2 per cent.

"Asian currencies including the ringgit are tracking better risk sentiment and higher Brent overnight," said Christopher Wong, a Singapore-based senior currency analyst at Malayan Banking Bhd. "Volatility remains high in the ringgit."

In South Korea, the government revealed an unprecedented 2016 budget on Tuesday to revive growth in Asia's fourth-biggest economy, after exports slumped in August by the most since 2009. Sixteen of 18 economists surveyed by Bloomberg see the Bank of Korea keeping the seven-day repurchase rate at 1.5 per cent on Friday, while two forecast a 25 basis-point reduction.

"The gain in the won is in line with other currencies with a weaker dollar overnight," said James Huh, an economist at Samsung Securities Co in Seoul. "We expect the BOK to keep the benchmark rate unchanged as it can still wait and see for several months. The budget is a positive."

The won led gains, rising 1 per cent, followed by a 0.7 per cent advance in Taiwan's dollar. The ringgit and India's rupee strengthened 0.2 per cent, while the baht and the rupiah each climbed 0.1 per cent. The Philippine peso rose 0.2 per cent, while China's yuan retreated 0.17 per cent.

BLOOMBERG