Asian currencies had their biggest weekly gain in 10 months after Federal Reserve Chairman Ben S. Bernanke eased concern a reduction is imminent in stimulus that has fueled fund flows to emerging markets.
The Bloomberg-JPMorgan Asia Dollar Index rose 0.5 percent this week as Bernanke said July 10 that “highly accommodative” monetary policy will be needed for the “foreseeable future.” The gauge has lost 1.2 percent since May 22, when the Fed indicated its bond buying could be tapered. The won led gains, completing its biggest weekly advance in five months as the Bank of Korea boosted the nation’s 2013 growth projection to 2.8 percent from an April estimate of 2.6 percent.
“Bernanke’s comments were a big support for risk sentiment this week,” said Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank Pcl. “But the basic trend remains for dollar strength on concern about the Fed’s tapering.”
The won advanced 1.6 percent this week, the biggest gain since the period ended Feb. 15, to 1,124.47 per dollar yesterday in Seoul, according to data compiled by Bloomberg. Taiwan’s dollar rose 1 percent to NT$29.932, the Thai baht strengthened 0.4 percent to 31.18 and Malaysia’s ringgit gained 0.3 percent to 3.1775. The Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, touched 116.13 on July 11, the highest since June 20.
Minutes of the Federal Open Market Committee’s June meeting that were released this week showed policy makers want to see more signs U.S. employment is picking up before tapering $85 billion a month of asset purchases.
The Bank of Korea left its benchmark interest rate at 2.5 percent for a second month on July 11 after a surprise cut in May. That stimulus, together with an extra budget of 17.3 trillion won ($15.4 billion) have boosted the growth outlook, Governor Kim Choong Soo said the same day.
“The BOK gave a more optimistic view of South Korea’s economic recovery, which will support the currency further,” said Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul.
India’s rupee advanced 1 percent this week to 59.6300 per dollar. The currency has rebounded 2.7 percent from a record low on July 8 after regulators announced steps this week to curb speculation. The Reserve Bank of India barred banks from proprietary trading in currency futures and exchange-traded options and the Securities & Exchange Board of India said it will double margins and curtail open position limits.
“The rupee should stabilize at current levels for now and may strengthen to about 58 or 57 if investors receive more signals that the U.S. stance will be accommodative,” said Samir Lodha, senior partner at QuantArt Market Solutions Pvt. in Mumbai.
The ringgit touched a three-week high of 3.1533 on July 11 as Bank Negara Malaysia held its overnight policy rate at 3 percent, a decision predicted by all 19 economists surveyed by Bloomberg News. The Malaysian currency could strengthen to 3 to 3.05 per dollar in the next few months, said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur.
Elsewhere in Asia, the Philippine peso was little changed this week at 43.412 per dollar yesterday. Vietnam’s dong strengthened 0.1 percent to 21,222, while China’s yuan slipped 0.08 percent to 6.1375 and Indonesia’s rupiah lost 0.5 percent to 9,993.