Monday, May 10, 2010

Goldman Sachs : Buy Ringgit, Philippine Peso, Indo Rupiah

Extracted from today's  Business Times  :

Goldman Sachs Group Inc recommended buying a basket of Asian currencies against the yen, saying there is “little obvious contagion” risk from Europe’s debt crisis.

The bank especially recommended the Malaysian ringgit, Philippine peso and Indonesian rupiah because of “strong growth, solid external balances and declining risk aversion,” . All 10 Asian emerging-market currencies gained today versus the yen after the European Union unveiled an unprecedented loan package to stop Greece’s fiscal woes from spreading.

“Given that European policy makers have now announced a credible package to shore up the system in euroland, we expect the market to turn its attention to trading the macro data,” the report said. “The macro backdrop in Malaysia, Philippines and Indonesia remains strong.”

The ringgit led gains in Asian currencies versus the yen this year, climbing 7.1 per cent, followed by the rupiah with a 3.6 per cent advance. The peso has climbed 2.2 per cent against the yen, according to data compiled by Bloomberg.

Goldman Sachs targets a basket of currencies including the ringgit, peso and the rupiah to rise 6 per cent against the yen, without specifying a time frame. It recommended limiting losses on the trade after a 2 per cent decline.

Regional Growth

Indonesia’s economy grew at the fastest pace in more than a year last quarter, expanding 5.7 per cent from a year earlier, the Central Statistics Office said today. Malaysia’s gross domestic product probably expanded 9.3 per cent in the first three months from a year earlier, after growing 4.5 per cent the previous quarter, a government report on May 13 may show, according to the median estimate of economists in a Bloomberg News survey.

The yen fell against all 10 Asian major currencies today as demand for high-yielding assets surged after the Bank of Japan said central banks from the US, Japan and Europe will participate in temporary US dollar swap agreements to contain the debt crisis. European Union finance ministers announced an aid package worth as much as 750 billion euros (US$962 billion), according to Spanish Economy Minister Elena Salgado.

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