Asian currencies had the best quarter in two years after global policymakers announced plans to pump money into financial markets to support growth, spurring capital flows into higher-yielding assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s most-active currencies, has risen 1.8 percent since June 30 as the US Federal Reserve, the European Central Bank and the Bank of Japan expanded bond-purchases programs to lower borrowing costs.
China will use “preemptive policy” to bolster growth in Asia’s biggest economy, Chinese Premier Wen Jiabao (溫家寶) said this month. India’s rupee led gains, reaching a five-month high, and China’s yuan surged to the highest since 1993.
“The underlying trend is still favorable for emerging currencies going into 2013, due to interest rate and growth advantage over developed economies,” said Roy Teo, a senior currency strategist in Singapore at ABN Amro Bank NV. “China’s growth is slowing and further monetary stimulus including interest rate cuts can be expected.”
The strength of the yuan also encouraged traders to buy into the New Taiwan dollar, with the currency rising 0.37 percent this week to NT$29.342 this week. It was also up 1.9 percent for the quarter.
The rupee gained 5.3 percent this quarter to 52.86 per US dollar in Mumbai. Malaysia’s ringgit climbed 3.5 percent to 3.0620 and the won closed 3.1 percent stronger at 1,111.38, near an 11-month high. The yuan rose 1.1 percent to 6.2849 for its best quarter this year.
Investors pumped US$9 billion into the stock markets of Taiwan, India, Indonesia and South Korea this month, exchange data show. The Asia Dollar Index hit 117.35 on Friday, the highest since March 9. The gauge’s 60-day historical volatility fell to 2.7 percent from 3.46 percent on June 29. The MSCI Asia Pacific Index of shares added 4.6 percent this quarter.
“With Europe and the US taking a monetary-easing stance, funds tend to move to bonds and stocks in Asia that offer higher yields,” said Shigehisa Shiroki, chief trader on the Asian and emerging markets team at Mizuho Corporate Bank Ltd in Tokyo.
Asian currencies gained on Friday after Spain approved its austerity budget, boosting optimism Europe is moving toward resolving its debt crisis. Other reports showed factory production in Japan and South Korea shrank last month from July.
“There were doubts on the progress of Europe’s debt crisis, and Spain’s austerity budget news is a relief,” said Jude Noh, Seoul-based chief currency trader at Suhyup Bank.
The won rebounded from last quarter’s 1.1 percent slide as Standard & Poor’s this month raised South Korea’s long-term foreign-currency debt rating by one step to “A+,” the fifth-highest level. Moody’s Investors Service and Fitch Ratings also raised their rankings for South Korea this quarter.
The yuan rallied before a weeklong National Day holiday starting tomorrow. The Shanghai Composite Index of shares jumped 4.1 percent in the past two days, on optimism policy makers plan to unveil measures to boost growth and the equity market.
“Funds are flowing back into the market as people bet China will soon act more aggressively to revive growth,” said Kenix Lai, a Hong Kong-based forex analyst at Bank of East Asia Ltd. “There’s always expectations the government will announce important polices before or at the end of a long holiday. The stock market is also rallying on stimulus bets.”