Asian currencies take back Brexit losses, as investors move money to Asia

Foreign currency dealers work in front of electronic boards in Seoul, South Korea, on June 27.
Foreign currency dealers work in front of electronic boards in Seoul, South Korea, on June 27.PHOTO: BLOOMBERG

HONG KONG (BLOOMBERG) - South Korea's won and the Malaysian ringgit led a third day of gains in developing nation currencies as markets rebounded after last week's selloff in the wake of the U.K. vote to leave the European Union.

The MSCI Emerging Markets Currency Index was 0.3 percent away from wiping out losses from the close of trade on June 23 before the Brexit decision.

Crude prices held above $50 a barrel, quelling concern about a drop in revenue for Malaysia as Asia's only net oil exporter.

The won also rose as factory output data on Thursday beat all forecasts in a Bloomberg survey, days after the government announced 20 trillion won ($17 billion) in stimulus.

Equities advanced, with Philippine shares and Chinese stocks traded in Hong Kong rising the most.

"I'm looking at the rebound in risk and the firming in oil prices and those factors are very supportive," said Stephen Innes, a senior trader at Oanda Asia Pacific Pte Ltd. in Singapore.

"The global central bankers are in the background and the markets realize that the central bankers are going to stand in front of any capitulation."

The won appreciated 0.7 percent to 1,152.60 per dollar as of 1:03 p.m. in Seoul and is 0.2 weaker than its closing rate on June 23, according to prices from local banks compiled by Bloomberg.

The ringgit strengthened 0.4 percent to 4.0230 in Kuala Lumpur and has gained almost 2 percent in three days.

South Korea's industrial production rose 4.3 percent in May from a year earlier, compared with the 0.3 percent median estimate in a Bloomberg survey. Output contracted a revised 2.6 percent in the previous month.

Thailand reports trade data on Thursday, while Taiwan's central bank is expected to cut its benchmark interest rate to 1.375 percent from 1.50 percent. "Externally, risk appetite appears to have returned post Brexit," said Christy Tan, head of markets strategy in Hong Kong at National Australia Bank Ltd.

"It remains to be seen if this is sustainable as we expect at least a few more months of uncertainties so we will be cautious about the recent relief rally in Asian assets."

The MSCI measure of currencies climbed 0.1 percent to 1,514.31, compared with 1,519.19 at the close on June 23.

It's risen 2.2 percent this month after a 3 percent loss in May. The Brazilian real, Colombia's peso and the South African rand led the gains in June, while Indonesia's rupiah was the best performer in emerging Asia ahead of the won.

While Asian currencies took on a more positive tone, others in the emerging-markets world headed lower on Thursday.

The Mexican peso was down 0.3 percent and the rand 0.2 percent. Turkey's lira was also 0.2 percent weaker, after rising in the past two days.

China's yuan headed for its worst quarterly performance on record on speculation policy makers are seeking to guide the currency lower as growth slows.

Information technology and industrial stocks topped Thursday's gains among the 10 industry groups in the MSCI Emerging Markets Index, which rose 0.8 percent after rallying the most in three months on Wednesday. It has climbed 2.6 percent this month, the biggest advance since March.

The Philippines Composite Index was up 2.3 percent, the most since May 11 and taking its two-day gain to 4 percent.

The gauge climbed to the highest in more than a year on optimism Rodrigo Duterte, who takes office as president at noon local time on Thursday, will speed infrastructure development.

The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong rose 1.5 percent. Benchmarks in India, Malaysia, Indonesia and South Korea were all about 0.7 percent higher.

"While Brexit is really bad for the U.K. and Europe, Asia is largely insulated," said Raymond Kong, who oversees $2.5 billion as a fund manager at One Asia Investment Partners in Singapore.

"I don't think there's a lot of companies from Asia with huge exposure to the U.K. We are looking to buy some Asian equities."