Taiwan Dollar Rises With Stocks, Leads Rally in Asia Currencies
(My comment: It's a Theme.--LP)
Jan. 17 (Bloomberg) -- Taiwan's dollar had its biggest gain in almost seven weeks, leading a rally in Asian currencies, on speculation investors abroad are increasing share purchases.
The currency also climbed after an agreement to allow charter flights between Taiwan and China for Lunar New Year next month. Easing transport curbs will cut companies' costs and raise demand for Taiwan's assets, said Gary Huang, a currency trader in Taipei at Union Bank of Taiwan.
``The stock market is cheering the accord on China-Taiwan flights, so that will help strengthen the Taiwan dollar,'' said Huang. ``Time and costs will greatly be reduced after the decision,'' aiding businesses.
The Taiwan dollar rose 0.6 percent to NT$31.84 against its U.S. counterpart as of 10:25 a.m. Taipei time, its largest advance since Dec. 2, according to Taipei Forex Inc. The Taiex index of stocks gained as much as 1.2 percent.
Chinese airlines will fly to the island for the first time in more than half a century. China is the biggest export market for Taiwan. Direct flights from Taipei cut a five-hour trip to Shanghai via Hong Kong to about 90 minutes, reducing cargo costs.
The mainland regards Taiwan as a renegade province, while the island's government refuses to acknowledge China's sovereignty.
South Korea's won rose on speculation the yen's gain to a five-year high versus the dollar Jan. 14 reduces the need for the Bank of Korea to sell its currency to keep exporters competitive with Japanese rivals.
Korean Won
The yen's 0.6 percent gain against the won this year helps make cars from companies such as Hyundai Motor Co., South Korea's biggest automaker, cheaper abroad relative to those from Japan's Toyota Motor Corp.
``With the yen having gone higher, the Bank of Korea may let the won rise a little,'' said Koby Koo, a Seoul-based currency trader at Korea Exchange Bank.
The won climbed 0.7 percent to 1,036.20, according to Seoul Money Brokerage Services Ltd. The yen advanced to 101.78 per dollar on Jan. 14, its highest since January 2000.
``Exports will maintain their strength,'' Song Kyung Jin, international press spokeswoman at the finance ministry, said on Jan. 12, citing comments by Finance Minister Lee Hun Jai at an investor forum organized by the Federation of Korean Industries.
Shipments abroad will rise to a record $285 billion in 2005 from last year's $254 billion, the government said on Jan. 4.
Other Asian currencies also strengthened after the yen's advance. The appreciation in regional currencies today extended weekly gains from last week.
`Distribute Weakness'
European Central Bank Chief Economist Otmar Issing on Jan. 11 signaled Asian nations should let their currencies rise to ease pressure on the euro. U.S. Treasury Secretary John Snow said the following day that countries need to spur growth to raise demand for U.S. goods and help it cut a record trade gap.
The won's 27 percent gain in the past three years, the 10 percent appreciation in the Taiwan dollar lagged behind a 52 percent advance in the euro.
``If you're looking to distribute dollar weakness, in terms of excessive savings and investment imbalances, emerging Asian currencies'' are among them, said James Malcolm, a currency strategist in Singapore at Deutsche Bank AG.
Asian Fundamentals
The U.S. trade deficit contrasts with Asia's surpluses. South Korea's trade surplus was at $30 billion last year, and Taiwan had a surplus of $6.1 billion in 2004.
The U.S. trade gap increased 7.7 percent to an all-time high of $60.3 billion in November from the previous record $56 billion in October, the Commerce Department said in Washington on Jan. 12.
The Singapore dollar rose 0.2 percent to S$1.6351, Thailand's baht climbed as much as 0.4 percent to 38.57, the highest since May 11, 2000. The Indonesian rupiah rose 0.2 percent to 9,140. The Philippine peso gained as much as 0.4 percent to 55.46, its strongest since May 6.
``Investors are still very bullish on Asian fundamentals,'' said Callum Henderson, global head of currency strategy in Singapore at Standard Chartered Plc. ``That's very positive for the short dollar-Asian currencies trade.'' A short position is a bet that a currency will decline.
The Singapore dollar may rise to S$1.60 by the end of the first quarter, South Korea's won will probably advance to 1,000, and Taiwan's currency may climb to NT$31.80, Henderson said.
`Very Bullish'
Asian central banks may only sell their currency to slow gains, rather than reverse them, Malcolm said.
The economic recovery in Asia ``is more matured and stronger, so economies can bear more dollar weakness,'' Malcolm said. ``The U.S. seems to actively want a weaker dollar now, so it makes intervention'' by central banks to sell their currencies ``more difficult to defend certain levels.''
The Organization for Economic Cooperation and Development on Nov. 30 cut its growth projection for the U.S. economy to 3.3 percent this year from an estimated 4.4 percent for 2004. The OECD also trimmed its 2005 forecast to 1.9 percent from 2.4 percent. Japan's economic expansion will slow to 2.1 percent this year after a projection of 4 percent for 2004, the OECD said.
The economic slowdown arises ``from probably the best growth in 20, 30 years for the global economy,'' Malcolm said. ``We're seeing moderation, but it's not the end of the world. I'm very bullish Asian currencies.'' |
