Asian currencies completed their biggest weekly advance since December after the Federal Reserve announced a third round of bond purchases, underpinning inflows to higher-yielding emerging-market assets.
Malaysia’s ringgit and Thailand’s baht reached four-month highs as Asian stocks posted their biggest weekly advance in 2012. The Fed said Sept. 13 it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month, while pledging to hold interest rates near zero at least through mid-2015. The European Central Bank agreed this month to unlimited bond-buying and China said this week it will use preemptive policy to bolster growth.
“Optimism that funds will flow to Asia from the QE3 is supporting Asian currencies and stocks,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “Asian currencies will probably see appreciation pressure for a while.”
The ringgit strengthened 2.4 percent this week to 3.0338 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. The baht advanced 1.5 percent to 30.75, Taiwan’s dollar gained 1.3 percent to NT$29.469 and South Korea’s won rose 1.2 percent to 1,117.30 following a credit-rating upgrade.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most-active currencies, climbed 0.9 percent this week to 116.92, the most since the five days ended Dec. 2, 2011. The gauge’s 60-day historical volatility dropped to 3.42 percent from 3.45 percent on Sept. 7.
The MSCI Asia Pacific Index added 3.8 percent this week, the biggest gain since December. Global funds bought $969 million more South Korean and Taiwanese stocks than they sold this week through Sept. 13, taking net purchases for those countries this year to $12 billion, exchange data show.
The won reached the strongest level since March, extending gains after Standard & Poor’s raised the nation’s long-term foreign-currency rating by one step to A+, the fifth-highest level. Moody’s Investors Service and Fitch Ratings also raised their grades on Korea in the past three weeks.
“The upgrade reflects our less negative assessment of the geopolitical risks on the Korean peninsula,” S&P said in a statement.
The Bank of Korea kept its seven-day repurchase rate at 3 percent on Sept. 13, a move predicted by just one of 16 economists surveyed by Bloomberg. The rest forecast a 25 basis point cut. Indonesia and Philippines also kept borrowing costs unchanged Sept. 13.
China’s yuan appreciated 0.45 percent this week to 6.3145 per dollar in Shanghai, the most in seven months, according to the China Foreign Exchange System. Premier Wen Jiabao said on Sept. 11 that China has “ample strength” to use fiscal and monetary policy to boost the economy, which grew 7.6 percent last quarter, the slowest pace in more than three years.
“We believe Asian central banks like China and Singapore will ease monetary policy going into the year-end,” said Roy Teo, a currency strategist at ABN Amro Private Bank in Singapore. “Currency strength could impede export recovery so there’s a need to balance that.”
Elsewhere, the Philippine peso advanced 0.6 percent this week to 41.405 per dollar, the strongest level since April 2008. India’s rupee advanced 2 percent to 54.3075, Indonesia’s rupiah rose 0.9 percent to 9,505 and Vietnam’s dong was little changed at 20,850.