COPENHAGEN - The best currency to own if China lets the yuan appreciate won't be the yuan, if history is any guide. It's everything from South Korea's won to Singapore's dollar and Indonesia's rupiah.
The won rose five times as fast as China's currency in the 12 months after officials in Beijing last relaxed the foreign-exchange regime in July 2005, data compiled by Bloomberg show.
Singapore's dollar climbed three times as much, the rupiah five times and Malaysia's ringgit increased twice as fast.
Traders are betting on a repeat of five years ago as an appreciating currency boosts China's power to buy Malaysian palm oil to Indonesian coal and Indian copper.
Revaluation may also enable Asian nations to do the same with their own currencies without damaging exports, while fueling US trade as the global economy emerges from its deepest postwar recession.
"A Chinese appreciation will kick off tightening in the whole Asian complex of currencies," said Richard Benson, who oversees $14 billion of currency funds as an executive director at Millennium Asset Management in London and is backing the won and the ringgit to lead the gains. "These currencies are fundamentally cheap."
Singapore will let its currency advance to keep inflation from accelerating after the economy grew more than anticipated in the first quarter, according to Goldman Sachs Group Inc.
Bank of Tokyo-Mitsubishi UFJ Ltd said on April 8 the won and rupiah may climb about 13 percent against the yen as central banks in nations such as Indonesia raise interest rates and reduce currency intervention.
"The heavily managed Asian currencies are the biggest candidates for appreciation once the yuan starts gaining," said Thomas Stolper, a foreign-exchange analyst with Goldman Sachs in London.
"Many of these countries are facing fiscal pressure and would like to see their currencies appreciate. A Chinese revaluation would give them the opportunity."
Twelve-month non-deliverable yuan forwards traded at 6.6255 per dollar in Hong Kong on Tuesday, reflecting bets the yuan will climb 3 percent from the spot rate of 6.8257, according to data compiled by Bloomberg. The contracts touched 6.6055 on April 9, the strongest since Jan 19.
Bloomberg
