Asian currencies rose this week, led by India’s rupee, on speculation the US Federal Reserve will delay reducing stimulus amid a US political impasse.
The Bloomberg-JPMorgan Asia Dollar Index gained 0.5 percent in the five days through Friday as the US government started a partial shutdown. Democrats, including US President Barack Obama, say Republicans must end the standoff and raise the debt ceiling as a precondition to talks on broader budget disputes. The Fed will meet on Oct. 30 and 31 after a surprise decision on Sept. 18 to maintain it US$85 billion a month of bond purchases.
“Asian currencies are riding on the tailcoats of a weaker [US] dollar,” said Vishnu Varathan, an economist at Mizuho Bank in Singapore. “Increasingly, the chances of an October taper are almost extinguished, but that will take the backseat the moment we get too close to a debt-ceiling crisis.”
India’s rupee climbed 1.7 percent this week to 61.44 per US dollar in Mumbai, according to data compiled by Bloomberg. The rupee touched 61.2637 on Friday, the strongest level since Aug. 13, after better-than-forecast current-account data boosted optimism that the annual gap would narrow from a record.
The New Taiwan dollar also advanced 0.5 percent this week to NT$29.502. The NT dollar touched NT$29.29 on Friday, the strongest level since Jan. 28, as Chinese data signaled an economic recovery in Taiwan’s biggest export market.
Foreign institutional buying in the local bourse also prompted traders to dump their US dollar holdings throughout the session on Friday, but the greenback’s retreat was cushioned by the central bank’s intervention, dealers said.
Meanwhile, the Malaysian ringgit appreciated 1.4 percent to 3.1827 and the Philippine peso gained 0.7 percent to 43.05.
The peso completed a weekly gain after strengthening the most in two weeks on Thursday, as the Philippines won a debt-rating upgrade from Moody’s Investors Service. That completed the nation’s ascent to investment rank after Standard & Poor’s and Fitch Ratings boosted their assessments in May and March.
Elsewhere in Asia, South Korea’s won advanced 0.3 percent this week to 1,070.43 per US dollar and Indonesia’s rupiah gained 0.1 percent to 11,523. Thailand’s baht rose 0.1 percent to 31.303 and Vietnam’s dong was little changed at 21,115. Chinese financial markets were closed from Tuesday for public holidays.
The US dollar fell for a fifth week, the longest stretch since April 2011, as the US congress failed to agree on a way to raise the US$16.7 trillion US debt limit, spurring investors to seek other assets.
The Bloomberg US Dollar Index traded at almost the lowest level since February as a congressional stalemate led to a partial government shutdown. The euro reached its strongest level against the greenback in eight months as Italy’s government won a confidence vote.
The Bloomberg US Dollar Index, which tracks the greenback against 10 major currencies, declined 0.3 percent this week, the most in two weeks, to 1,009.98 in New York.
The US dollar fell 0.8 percent to ￥97.48, the third weekly drop. It touched ￥96.93, the lowest since Aug. 28. The US currency weakened 0.3 percent to US$1.3558 per euro. The yen strengthened 0.5 percent to ￥132.14 per euro.
Sterling fell the most this week among the US dollar’s 16 most-traded peers, after reaching a nine-month high, amid speculation the UK economic recovery is not strong enough to warrant an early interest-rate increase.