Asian currencies had a second weekly advance on speculation the US and China would adjust policies to revive the world’s two biggest economies, boosting demand for riskier assets.
Malaysia’s ringgit gained the most since January and South Korea’s won reached a two-week high after US Federal Reserve Chairman Ben Bernanke said on Tuesday that policymakers were studying options for further stimulus measures. Chinese Premier Wen Jiabao (溫家寶) said the government needs to assess the situation in China’s economy, which grew at the slowest pace since 2009 last quarter, Xinhua news agency reported last Sunday.
“Investor sentiment is still being driven by prospects of fresh quantitative easing in the US,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp in Singapore. “This is benefiting high-yielding assets.”
The ringgit rallied 1.1 percent to 3.1493 per US dollar in Kuala Lumpur, snapping a two-week drop, according to data compiled by Bloomberg. The won rose 0.8 percent to 1,141.20 and the Philippine peso gained 0.3 percent to 41.865.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s currencies, added 0.1 percent, while its 60-day historical volatility dropped to 3.66 percent from 3.72 percent a week ago. The MSCI Asia Pacific Index of equities climbed 1.3 percent for the week.
The New Taiwan dollar strengthened 0.1 percent to NT$29.995 against its US counterpart for the week, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings used to price options, declined 10 basis points to 3.12 percent on Friday.
Elsewhere, Indonesia’s rupiah was little changed this week to at 9,450 per dollar, Thailand’s baht was steady at 31.66 and India’s rupee weakened 0.3 percent to 55.3275. The Vietnamese dong rose 0.1 percent to 20,850.
The euro fell for a fourth straight week against the yen, touching the lowest level in almost 12 years, as signs the European debt crisis is worsening dampened demand for the shared currency.
The US dollar dropped against most major peers as investors added to bets the Federal Reserve will take new steps to stimulate economic expansion that may debase the currency. Data next week is forecast to show U.S. growth slowed. Australia’s dollar climbed as implied volatility fell to an almost five-year low and traders sought higher yields, while the euro slid even as European officials approved an aid package for Spanish banks.
The 17-nation currency fell 1.6 percent to ￥95.43 yesterday in New York, from ￥96.98 on July 13. It touched ￥95.35, the weakest since November 2000. The euro declined for a third week versus the US dollar, losing 0.8 percent to US$1.2157 and reaching US$1.2144 on Friday, its weakest since June 2010. The yen advanced for a fourth week against the dollar, its longest winning stretch in a year, gaining 0.9 percent to ￥78.49.
Gilts rose, with 10-year bonds extending a third weekly gain, after the budget deficit widened more than economists forecast, fueling speculation the central bank will need to cut interest rates to spur growth.
Two-year note yields dropped to a record low as Spanish and Italian bonds tumbled on concern the region’s sovereign debt crisis is worsening. The British pound strengthened for a third day against the euro as investors sought the relative safety of UK assets. The Debt Management Office auctioned ￡3 billion (US$4.7 billion) of bills. weakened against the US dollar.