Malaysia's ringgit and the Philippine peso led gains in Asian currencies on mounting speculation China will let the yuan appreciate, making goods imported from regional peers cheaper.
The Bloomberg-JPMorgan Asia Dollar Index rose to a 19-month high and the MSCI Asia-Pacific Index of shares climbed to the highest level since August 2008, on signs the global economic recovery is picking up steam. Overseas investors added to holdings of stocks in South Korea, Taiwan and Thailand this month, while a report yesterday showed U.S. service industries grew at the fastest pace in more than three years.
"The economic conditions are improving, and a lot of countries see China supporting the current growth momentum," said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur. "It's a good time for China to revalue its currency, and if it does so, it will benefit the ringgit and other Southeast Asian currencies."
The ringgit appreciated 0.4 percent to 3.2140 per dollar as of 4:21 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.2040, the strongest level since May 2008. The peso advanced 0.2 percent to 44.915 and touched 44.825, the highest since Aug. 14, 2008. Indonesia's rupiah strengthened as much as 0.3 percent to a two-year high of 9,037.
Government reports this week are expected to show increases in Malaysia's factory output and Taiwan's exports, according to surveys conducted by Bloomberg News. Indonesia's central bank held its benchmark interest rate at a record low of 6.5 percent today for the eighth straight month to bolster economic growth. Bank Indonesia sees room for the rupiah to strengthen further, Deputy Governor Budi Mulya said in Jakarta.
The U.S. Institute for Supply Management's index of non- manufacturing businesses that make up almost 90 percent of the world's largest economy climbed to 55.4 from 53 in February. A Labor Department report on April 2 showed U.S. employers added 162,000 jobs last month, the most in three years.
The ringgit, Taiwan's dollar and the peso advanced to the strongest levels in at least 19 months as regional stocks extended gains. Yuan forwards rose the most in more than a month on speculation a U.S. decision to delay a report labeling China a currency manipulator will give the Asian nation greater breathing space to relax its foreign-exchange rate policy.
Taiwan's currency strengthened before data from the statistics bureau issued after the close of trading showed consumer prices rose for a third month in March, gaining 1.27 percent from as year earlier, after increasing 2.35 percent in February, which was the fastest pace in 16 months.
"With the concern over imported inflation looming, the central bank may allow the Taiwan dollar to rise, though not too much," said Lucas Lee, an economist at Mega Securities Co. in Taipei. "Prices of international oil and commodity prices are unpredictable."
The central bank said on March 25 that it will "maintain order in the foreign-exchange market" if "irregular factors cause large fluctuations."
Taiwan's dollar appreciated 0.2 percent to NT$31.695 against the greenback and touched NT$31.651, the strongest level since September 2008.
U.S. Treasury Secretary Timothy F. Geithner three days ago announced the postponement of the April 15 deadline for the annual review.
"Clearly the market is seeing this as giving China a window of opportunity to move its currency," said Thomas Harr, a senior foreign-exchange strategist at Standard Chartered Plc in Singapore. "We will likely see more volatility in the central parity rate in May or June, and then you will see more clear depegging in the late second quarter or the beginning of the third quarter."
Twelve-month non-deliverable forwards advanced 0.3 percent to 6.6293 per dollar in Shanghai, according to data compiled by Bloomberg. The contracts reflect bets the currency will climb 3 percent from the spot rate of 6.8258.
South Korea's won was little changed, trading near an 11- week high, on concern the repatriation of dividends paid by local companies to overseas investors will offset inflows into the nation's stocks.
The currency closed at 1,123.10 per dollar in Seoul versus 1,123.05 yesterday, according to data compiled by Bloomberg. The currency has advanced 3 percent this year.
The dollar "is supported because of the remittance of dividends," said Sam Hong, a foreign-exchange dealer with Shinhan Bank in Seoul. "It's possible the Korean won will strengthen beyond the 1,120 level because of capital inflows."
Elsewhere, the Singapore dollar gained 0.1 percent to S$1.3970 while India's rupee was little changed at 44.4637. Financial markets in Hong Kong will reopen tomorrow for the first time since April 1. China's market was shut yesterday and Thailand's today, owing to holidays.
To contact the reporters on this story: David Yong in Singapore at email@example.com.