South Korea’s won and the Philippine peso rose on speculation central banks will roll out more stimulus that may spur demand for emerging-market assets. Most other Asian currencies were little changed.
With U.S. inflation below a 2 percent target the Federal Reserve may announce new steps to boost growth when a two-day meeting ends today, according to 12 of 21 primary dealers who trade with the central bank. Euro-area leaders at the Group of 20 summit pledged yesterday to “take all necessary policy measures” to defend the currency union, according to a final statement issued at the conclusion of a gathering in Mexico.
“There’s growing speculation about the Fed’s stimulus as the deepening Europe crisis is negative for the U.S. economy,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Such speculation is supportive for stocks and emerging-market currencies.”
South Korea’s won appreciated 0.5 percent to 1,151.10 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso advanced 0.4 percent to 42.110 and Taiwan’s currency traded at NT$29.878 compared with NT$29.890 yesterday.
Taiwan’s dollar earlier strengthened to the highest level in more than two weeks ahead of a policy review tomorrow, when the central bank will probably hold the benchmark interest rate at 1.875 percent, all 15 economists surveyed by Bloomberg predicted.
Premier Sean Chen is considering measures to boost private investment and expand projects to build roads and railways, according to a government statement yesterday.
Official data showed today Taiwan’s export orders dropped 3.04 percent in May from a year earlier, a third straight contraction. The median estimate of analysts in a Bloomberg News survey was for a 3.7 percent slide.
The won reached a five-week high as the Kospi Index and other regional benchmarks tracked gains in U.S. stocks. South Korea’s Vice Finance Minister Shin Je-Yoon said yesterday that market volatility will remain high for “some time” and that global consensus is needed on controlling capital flows.
The Fed could announce today that it will extend Operation Twist, a $400 billion program involving the sale of short-maturity debt and the purchase of longer-term bonds, or a third round of quantitative easing.
Spain’s 10-year bond yields surpassed 7 percent this week. The government sold 12-month bills at an average yield of 5.074 percent yesterday, 2.1 percentage points more than the 2.985 percent paid on May 14.
“Everyone is digesting the G-20 meeting; markets recognize this is the start of a process and the challenges in resolving Europe’s crisis still remain,” said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. “The market is deciding between QE3 or extending Operation Twist.”
Elsewhere, Malaysia’s ringgit traded at 3.1585 per dollar, compared with 3.1575 yesterday, and Indonesia’s rupiah was at 9,443 versus 9,467. Thailand’s baht dropped 0.3 percent to 31.48 and China’s yuan weakened 0.08 percent to 6.3599.