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Rupiah, Philippine Peso, Rupee Lead Asia as ECB Spurs Yield Hunt

  Jan 23, 2015 7:03 AM ET

The Philippine peso, Indonesia’s rupiah and India’s rupee rallied the most in Asia this week on signs the European Central Bank’s stimulus program will boost fund flows to higher-yielding emerging-market assets.

The peso strengthened 1.2 percent from Jan. 16, the most since May, to 44.177 a dollar in Manila, according to data compiled by Bloomberg. The rupiah advanced 0.9 percent to 12,473, completing its biggest weekly gain in three months, and the rupee rose 0.7 percent to 61.4375. The currencies climbed 0.4 percent, 0.1 percent and 0.4 percent, respectively, today.

The ECB announced a quantitative-easing program worth at least 1.1 trillion euros ($1.24 trillion) on Thursday to counter the threat of deflation, although speculation on the stimulus had been buoying the currencies earlier in the week. Ten-year Indonesian sovereign debt yields 7.28 percent, while Indian notes yield 7.71 percent. That compares with 0.38 percent for similar-maturity German bunds.

“The ECB quantitative-easing announcement has helped to boost risk appetite,” said Mitul Kotecha, head of Asia-Pacific currency strategy at Barclays Plc in Singapore. “There seems to be a renewed focus on carry trades and the rupee and rupiah are key beneficiaries.”

The ECB will buy 60 billion euros of assets each month through September 2016 in an effort to put more cash into circulation, President Mario Draghi said. Near-stagnant economies and declines in consumer prices have compelled the monetary authority to act three months after the Federal Reserve ended its bond purchases.

Bond Flows

“The ECB quantitative easing sharply reduces the likelihood of a flare up of the euro-zone debt crisis, so I think that creates a kind of risk-on environment,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “The Philippines, Indonesia and India, they’ll get those flows.”

Overseas funds pumped 5.73 trillion rupiah ($460 million) into Indonesian local-currency sovereign notes in the first three days of this week, the latest finance ministry data show. They bought a net $347 million of Indian debt over the same period, exchange figures show. Philippine 10-year government notes yield 4.18 percent, although there is no recent fund flow data available.

Philippines, Indonesia and India are net oil importers and their currencies have benefited from Brent crude’s 56 percent plunge since the end of June. The rupee has led gains in Asia this year, strengthening 2.6 percent, followed by a 1.3 percent gain in the peso.

“We see the ECB stimulus as a near-term bullish signal for emerging markets, said Jason Daw, head of Asian foreign exchange at Societe Generale SA in Singapore. ‘‘Within the global emerging markets and regional currencies, the rupee is one of our top picks for this year.’’

Elsewhere in Asia, Taiwan’s dollar advanced 0.7 percent this week to NT$31.432 against its U.S. counterpart. China’s yuan fell 0.4 percent to 6.2288, Thailand’s baht slipped 0.3 percent to 32.625, South Korea’s won weakened 0.6 percent to 1,084.02 and Malaysia’s ringgit dropped 1.2 percent to 3.6005.

original source:http://www.bloomberg.com/news/2015-01-23/rupiah-philippine-peso-gain-this-week-as-ecb-spurs-yield-hunt.html

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