Asian Currencies Advance for Third Week on Fed Stimulus Optimism

Asian currencies had a third weekly gain, led by South Korea’s won, on optimism the Federal Reserve will delay any reduction in stimulus after a budget impasse threatened the world’s largest economy.

The Bloomberg-JPMorgan Asia Dollar Index extended its advance from Oct. 11 to 0.3 percent after U.S. President Barack Obama signed legislation yesterday that ended a 16-day partial government shutdown and deferred funding and debt ceiling deadlines into 2014. The “fiscal shenanigans” undermined the case for tapering the Fed’s $85 billion in monthly bond buying, Dallas Fed President Richard Fisher said yesterday.

“The removal of the U.S. default risk added to improving risk sentiment,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. Speculation the Fed “will not rush to reduce stimulus already gave some underlying support to emerging-market assets,” he said.

The won strengthened 0.9 percent in the past five days to 1,062.22 per dollar in Seoul, according to prices compiled by Bloomberg. Thailand’s baht gained 0.8 percent to 31.05, Malaysia’s ringgit climbed 0.7 percent to 3.1553, while Indonesia’s rupiah rose 0.5 percent to 11,310. The yuan gained 0.39 percent to 6.0968, its best week in a year.

Global funds bought $1.7 billion more South Korean, Taiwanese, Thai and Philippine stocks than they sold this week through yesterday, exchange data show.

‘Budget Fight’

Standard & Poor’s said suspending government operations would shave at least 0.6 percent from fourth-quarter U.S. gross domestic product growth, taking $24 billion out of the economy. The Fed shouldn’t begin reducing bond purchases because, during the shutdown, the government halted data used to gauge the economy’s health, Chicago Fed President Charles Evans, an outspoken advocate of greater stimulus, said yesterday.

“The probability that taper will be pushed out to March of next year has increased,” said Igor Arsenin, Singapore-based head of emerging-markets rate strategy for Asia at Barclays Plc. “The budget fight can resume in December again.”

The won pared gains today, after touching a nine-month high of 1,060.27 per dollar, as authorities said they may intervene to limit advances that threaten exports.

South Korea is monitoring foreign-exchange inflows and currency movements to see whether there are speculative activities, Finance Ministry Director Kim Seong Wook said by telephone today. The Bank of Korea will take steps to ensure market stability, including injecting liquidity and changing rules on capital flows, if needed, it said in a report to parliament today.

“Authorities are giving a strong signal that they may step in as the won rises to near 1,060 against the dollar,” said Jude Noh, the chief currency trader at Suhyup Bank in Seoul.

China Growth

The yuan touched a 20-year high as data showed China’s economic expansion accelerated in the third quarter. The People’s Bank of China boosted the currency’s daily fixing by 0.1 percent to 6.1372 per dollar, the strongest since a peg to the greenback ended in 2005. Gross domestic product rose 7.8 percent in the three months through September, from 7.5 percent in the previous quarter, official figures showed today.

“China’s economic growth is strong and that translates into further yuan appreciation pressure,” said Daniel Chan, director at China Silver Global Investment Consultant Ltd. in Hong Kong.

The yuan reached 6.0915 per dollar today, China Foreign Exchange Trade System prices show, the strongest level since the government unified the official and market exchange rates at the end of 1993.

Elsewhere in Asia, Taiwan’s dollar advanced 0.15 percent to NT$29.446 against the U.S. counterpart and the Philippine peso gained 0.2 percent to 43.073. India’s rupee fell 0.3 percent to 61.275 and Vietnam’s dong was little changed at 21,110 compared with 21,100 last week.

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