Asian Currencies Climb to 8-Month High as Fed Maintains Stimulus

Asian currencies rose to an eight- month high as regional stocks snapped a four-day slump after the Federal Reserve said it will maintain pro-growth policies to support a recovery in the world’s largest economy.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active Asian currencies outside of Japan, reached the highest level since February. The Fed yesterday repeated interest rates may stay near zero at least through mid-2015 and kept unchanged a bond-purchase plan unveiled last month. China’s yuan hit a 19-year high and Malaysia’s ringgit climbed the most in six weeks on optimism the U.S. central bank’s policies will support demand for higher-yielding assets.

“We expect Asian currencies to continue to show moderate strength,” said Roy Teo, a foreign-exchange strategist in Singapore at ABN Amro Bank NV. “The Fed will keep buying bonds, maybe add Treasuries to its purchases, to support growth.”

The ringgit rallied 0.7 percent to 3.0390 per dollar as of 4:37 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Taiwan’s dollar appreciated 0.2 percent to NT$29.280 and South Korea’s won advanced 0.5 percent to a one-year high of 1,098.05. India’s rupee rose 0.4 percent to 53.53.

The Fed called U.S. growth “moderate” and maintained its open-ended program to buy $40 billion of mortgage-backed bonds a month, after a two-day policy meeting in Washington yesterday. Foreign investors have plowed almost $8 billion into the stock markets of India, South Korea and Indonesia since the program was announced on Sept. 13, exchange data show.

U.S. Recovery

The Asia Dollar Index rose 0.34 percent, the most since Sept. 14, while its 60-day historical volatility fell to 2.26 percent from 2.30 percent. New home sales in America rose 5.7 percent last month, the most since April 2010, a report showed yesterday.

“Expectations that the U.S. will continue to grow have helped improve risk appetite,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. (MAY) in Singapore. “The better home sales data in the U.S. also helped.”

China’s yuan gained 0.1 percent to 6.2417 per dollar, the strongest level since the government unified the official and market exchange rates at the end of 1993. The central bank set its daily yuan reference rate stronger for the first time in five days.

‘Support the Yuan’

“We are seeing more bets on a rebound in China’s growth in the coming quarters,” said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. “The weakness in the dollar will also support the yuan as the Fed continues with quantitative easing.”

The Philippine peso climbed 0.4 percent to 41.208 per dollar. The central bank today cut its overnight rate to 3.5 percent from 3.75 percent, a move predicted by 14 of 21 economists in a Bloomberg survey. Seven had expected no change.

Elsewhere, Thailand’s baht rose 0.2 percent to 30.67 per dollar. Indonesia’s rupiah was steady at 9,611 and Vietnam’s dong was little changed at 20,848. Financial markets in Malaysia, Indonesia, Philippines and Singapore will be closed tomorrow for a holiday.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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