Asian currencies rose for a fourth week, spurred by demand for higher-yielding assets after the Federal Reserve pledged to keep interest rates near zero through late 2014.
The Bloomberg-JPMorgan Asia Dollar Index climbed to a three-month high as money managers plowed more cash into regional bonds and stocks. Malaysia’s ringgit hit a four-month high and the rupee touched the strongest level in 11 weeks. Gains were limited by concern Europe will struggle to forge a debt-swap deal involving 206 billion euros ($270 billion) of Greece’s repayment obligations.
“Regional currencies got a big boost this week from speculation that low interest rates in the US will encourage fund inflows,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp in Bangkok. “Still, with Europe’s debt concern lingering, it’s hard to see a sustained gain from here.”
The ringgit appreciated 2 per cent to 3.0427 per dollar as of 4 pm in Kuala Lumpur, according to data compiled by Bloomberg. The rupee gained 1.7 per cent to 49.50 and touched 49.435 earlier, the highest level since November 9. The Philippine peso and South Korea’s won advanced one per cent to 42.85 and 1,123.20, respectively. Thailand’s baht strengthened 0.7 per cent to 31.31. The Asia Dollar Index rose 1.6 per cent this month, the most in a January since 2006, as central banks in India, Thailand, Indonesia and the Philippines eased credit conditions to bolster economic growth.
US interest rates
The Fed said on January 25 they saw ‘exceptionally low’ interest rates through 2014, having previously pledged to refrain from raising borrowing costs until at least mid-2013. The central bank kept its target rate between zero and 0.25 per cent, unchanged since December 2008, to secure a recovery from the global credit-market crisis. Greece needs to repay 14.5 billion euros of debt in March.
Emerging-market bond funds saw inflows of $907 million in the week through yesterday, Barclays Capital said in a note to clients today, citing data from EPFR Global. Investors bought $1.4 billion more stocks than they sold in South Korea, the Philippines and Thailand in the first four days of this week, exchange data show. The ringgit and the peso were little changed today as a technical indicator, the so-called relative-strength index, signaled the dollar was poised to rebound against them.
‘Technical correction’
“It’s the start of a technical correction,” said Rafael Algarra, executive vice president and head of financial markets at Security Bank Corp in Manila. “We’ve seen a run on the peso mostly because of the offshore news. People are looking for an excuse to take profits on this long run.”
Policy makers in Thailand and the Philippines lowered benchmark interest rates this month. India cut the cash reserve ratio for banks on January 24 and Indonesia lowered inter-bank lending costs on January 17. Bank Negara Malaysia will keep its overnight rate at 3 per cent at its January 30 policy meeting, unchanged since May 2011, according to all 14 economists in a Bloomberg News survey.
Elsewhere, Indonesia’s rupiah declined 0.1 per cent on Saturday to 8,974 per dollar, taking its loss this week to 0.3 per cent, according to prices from local banks compiled by Bloomberg. The Vietnamese dong fell 0.6 per cent to 21,023. Financial markets in China and Taiwan were closed all week for the Lunar New Year holiday.
