Malaysia, S Korea currencies lead as Asia dodges emerging markets slump
The faltering emerging-market currency rally is stronger than ever in Asia.
The faltering emerging-market currency rally is stronger than ever in Asia.
Of the nine developing-nation exchange-rates to strengthen last month, six were from Asia, with Malaysia's ringgit and South Korea's won leading the gains.
A Bloomberg index of the 20 most-traded emerging-market currencies posted its first back-to-back monthly drop since January as geopolitical strife and the withdrawal of extraordinary monetary stimulus in the US makes investors choosier about where they put their cash.
Asian countries are being favoured because of their generally superior trade balances, particularly now that China's economy is showing signs of stabilising. South Korean and Indian bond markets attracted a combined US$5 billion last month from international investors, while Turkey and South Africa saw outflows of US$2 billion, data shows.
Asia stands out as a safe haven, far away from geopolitical stress
"Asia stands out as an alternative safe haven, far away from geopolitical stress in Ukraine, Gaza and Iraq," said Anders Faergemann, a senior money manager in London at PineBridge Investments. "The region is also benefiting from the apparent stabilisation of China's economic growth."
The ringgit climbed 1.4 per cent in August, reaching a 10-month high of 3.1415 per dollar on August 28, and the won rose by the same amount, helped by the central bank's forecast of a record current-account surplus. Among the top gainers elsewhere were Brazil's real, where a pro-business presidential candidate is rising in the polls, and South Africa's rand, which has benefited from two rate increases.
Earlier in the year, the top performers were a mixed bag, with seven of the 14 currencies to strengthen in the second quarter outside Asia.
The Bloomberg JP Morgan Chase & Co Asia Dollar Index rose 0.6 per cent last month, its biggest monthly gain since October, even as the gauge tracking the top 20 emerging-market exchange rates lost 1 per cent.
More often than not, trade balances are key. Seven of the 10 largest Asian economies posted surpluses in their current accounts, the broadest measure of trade, in the first quarter. The exceptions include India, whose rupee was the smallest gainer among its peers last month, and Indonesia, where the rupiah weakened 1 per cent.
The seven biggest Latin American economies, from Brazil to Peru, saw deficits. In Europe, shortfalls included 0.9 per cent of gross domestic product in Poland and 7.5 per cent in Turkey.
