Korean Won Leads Weekly Gains in Asia as Fed Holds; Peso Slides

  • Emerging currencies set for best five-day advance since July
  • Philippine peso in longest slide since November amid outflows

South Korea’s won led an advance in Asian currencies this week as the Federal Reserve’s decision to refrain from raising interest rates burnished the appeal of higher-yielding assets.

A gauge of emerging-market currencies headed for its biggest weekly gain in more than two months after Fed officials also scaled back the number of increases they expect next year to two from three. The Bank of Japan reinforced optimism that it will keep in place measures to spur economic growth and inflation. Brent crude rallied almost 4 percent in the past five days, adding to support for developing-nation currencies.

“We got over the two big event risks with the Bank of Japan and the Fed, so people are adding risk back on,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “The Fed didn’t hike and they weren’t as hawkish as expected. That tends to make the dollar a bit weaker.”

The won climbed 1.3 percent since Sept. 16 to 1,104.78 per dollar as of 10:39 a.m. in Seoul, according to prices from local banks compiled by Bloomberg. It fell 0.2 percent Friday. The ringgit strengthened 0.4 percent this week to 4.1205 versus the greenback. The Philippine peso fell 0.3 percent to 47.94 in the same period, headed for a fourth weekly decline, as investors pulled money from the nation’s assets. That’s its longest losing streak since November.

Futures traders are pricing in a 59 percent chance of a U.S. tightening by December after Fed Chair Janet Yellen said that while the case for a rate rise had strengthened, it made sense to delay the move amid signs that Americans who dropped out of the labor market are now looking for work.

“Going ahead, market is now more convinced that the Fed will be patient and gradual, so the market will not be in a hurry to push up the rate-hike expectations,” said Christy Tan, Head of Market Strategy at National Australia Bank Ltd. in Hong Kong.

Ten-year South Korean government debt advanced this week, pushing the yield down seven basis points to 1.51 percent, according to prices from local banks compiled by Bloomberg.