Asian currencies completed a second weekly gain, led by the Philippine peso and India’s rupee, on speculation the region’s growth outlook and rising interest rates will attract foreign funds.
The Bloomberg-JPMorgan Asia Dollar Index touched a 14-year high this week, as India boosted borrowing costs by more than economists forecast and Bank Negara Malaysia said taming inflation is “critical,” a week after it described borrowing costs as being “quite low.”
“The fundamentals are still attractive in the Asian region as growth continues,” said David Cohen, a Singapore-based economist for Action Economics. “This has been contributing to the central banks’ decisions to raise interest rates, which is supportive of their currencies.”
The New Taiwan dollar fell 0.2 percent this week to NT$28.890 and the Philippine peso strengthened 0.7 percent to 42.07 per US dollar in Manila. Meanwhile, the rupee appreciated 0.4 percent to 44.19, Indonesia’s rupiah gained 0.3 percent to 8,507 and Singapore’s dollar climbed 0.2 percent to S$1.2056.
The Asia Dollar Index advanced 0.2 percent this week and 1 percent this month, the most since April.
“Asia is relatively more stable than Europe or the US and looks safer compared with the rest of the world,” said Suan Teck Kin, an economist at United Overseas Bank (大華銀行) in Singapore. “That contributes to inflows to Asia.”
The peso traded near its strongest level in more than three years after Bangko Sentral ng Pilipinas said on Thursday that risks to its inflation forecasts remain “skewed to the upside.”
Policymakers kept the benchmark interest rate at 4.5 percent on Thursday having announced two increases of a quarter of a percentage point each earlier in the year.
The rupee climbed to its highest level in almost three years after the central bank raised interest rates this week for the fifth time this year to damp inflation. The currency touched 43.855 on Wednesday, the strongest since August 2008.
Elsewhere, Malaysia’s ringgit rose 0.2 percent this week to 2.9673. Thailand’s baht dropped 0.1 percent to 29.84, China’s yuan advanced 0.1 percent to 6.4366, while South Korea’s won weakened 0.2 percent to 1,054.08.
BIGGEST LOSER
The euro was the biggest loser among the most-traded currencies this month after Moody’s Investors Service said it may cut Spain’s credit ranking and the nation’s prime minister called an early election, renewing concern Europe’s fiscal crisis is spreading. The US dollar approached a postwar low against the yen as the US economy grew less than forecast.
The US dollar dropped 4.7 percent to ¥76.77 after touching ¥76.73, the lowest level since touching a post-World War II record of ¥76.25 on March 17. The dollar fell 0.7 percent to US$1.4399 versus the euro, from US$1.4502. The 17-nation currency slid 5.4 percent to ¥110.54, from ¥116.61.
“There is a lot of gloom out there,” said Samarjit Shankar, a managing director for the foreign exchange group in Boston at Bank of New York Mellon, the world’s largest custodial bank. “It is quite firmly risk-off.”
The euro weakened this month versus all of its major counterparts after Spain’s “Aa2” ratings were placed on review for possible downgrade by Moody’s on Friday.
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