Asian currencies stronger on Fed's `no urgency' talk

"Our main direction is clearly up, but there's no urgency. We're not hitting all cylinders yet, and that gives us a little bit of time."

Susan Bies, US Federal Reserve governor

Asian currencies strengthened after Federal Reserve Governor Susan Bies said there's "no urgency" to lift the key US lending rate, easing concern the interest-rate advantage in Asia will diminish.

Overseas investor demand for local stocks also supported Asian currencies, after purchases of a net US$618 million of South Korea's equities last week, 6.5 times the previous week's purchases, according to the Seoul stock exchange. Global investors also were net buyers of Taiwan, Thai and Indonesian shares.

Investors "are quite positive toward regional stocks," said Steven Chang, vice president of global markets at State Street Bank & Trust Co in Hong Kong. "The flows may be a little bit more persistent. A lot of the positions are for stronger Asian currencies." Investors are paring expectations of higher US rates, he said.

The New Taiwan dollar closed at NT$33.907 against its US counterpart in Taipei from Friday's NT$33.925, according to Taipei Forex Inc.

The Thai baht strengthened 0.1 percent to 41.54. South Korea's won was at 1,145.05 from Friday's 1,145.85, according to Seoul Money Brokerage Services Ltd. The won, New Taiwan dollar and baht rose against the US currency in the past week.

Chang recommends investors buy Asian currencies against the dollar "in the short term."

The Bank of Korea last week kept its key rate at 3.5 percent, more than double the Fed's 1.5 percent target lending rate between banks. Taiwan's rediscount rate, charged to commercial lenders for 10-day loans, was at 1.375 percent, and Thailand's central bank last month boosted its rate to the same as the Fed's.

"Our main direction is clearly up, but there's no urgency," Susan Bies, a voting member of the Fed, said in response to a question after a speech to the National Association of State Credit Union Supervisors in Albuquerque, New Mexico. "We're not hitting all cylinders yet, and that gives us a little bit of time."

October federal funds futures contracts yielded 1.735 percent Friday, indicating the odds are about 94 percent the Fed will lift its key interest rate a quarter point this month.

The Fed's Open Market Committee is expected to raise the rate to 1.75 percent at its meeting on Sept. 21, economists said. The US central bank has said it could continue to do so at a "measured" pace.

"People know US rates are going to be higher, but the question is when that will be reached," said Philippe Gernez, regional head of foreign exchange and derivatives in Singapore at Natexis Banques Populaires.

"The Fed can wait" to raise rates and may not increase rates at the November and December policy meetings, he said.