Asian currencies gained this week as economic data from Taiwan to South Korea sparked optimism that regional growth is picking up, while in Jakarta, the rupiah fell after the Indonesian government said it would allow declines to spur exports.
The reports spurring the upward trend showed that Taiwan’s factory output growing more than estimated, while manufacturing in China rose at the fastest pace in seven months and South Korea’s current account surplus widened.
Global investors pumped more than US$5 billion this month into six Asian emerging stock markets tracked by Bloomberg this week.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, rose 0.15 percent over the past five days and 0.6 percent for the quarter.
In Taipei, the New Taiwan Dollar gained 0.3 percent to NT$29.962 this week, according to data compiled by Bloomberg.
A report on Monday showed that the nation’s industrial output last month rose 5.19 percent from a year earlier, exceeding economists’ median estimate for a 2.75 percent gain, while on Thursday, the central bank held a meeting at which it kept its key interest rate at 1.875 percent and expanded mortgage restrictions.
The central bank on Thursday said inflation expectations have risen as turbulence in the Middle East pushes up oil prices, while consumer price gains have exceeded 1.6 percent over the past three months after staying below 1 percent since May last year.
On Friday, local exporters rushed to dump the greenback in exchange for the NT dollar in preparation for the closing of their books at the end of the current quarter, dealers said.
Downward pressure on the US dollar was added at a time when the strength of the won encouraged traders to cut their greenback holdings, they added.
The losses suffered by the US dollar were capped after the central bank stepped in to prop up the currency and help it recoup most of its losses at the close, they said.
The central bank has sold the NT dollar in the runup to the close on most days since March 2012, according to traders who asked not to be identified. Currency appreciation reduces import costs, but hurts exports, which make up about 60 percent of the national economy.
Buying by local exporters is expected to continue today, the last business day of the quarter, which could lead the US dollar to further weakness, they said.
Foreign investors kept moving funds into the local bourse to buy a net in the market, which placed more selling in the US dollar throughout the session, dealers said.
Global funds have bought US$685 million more local equities than they sold this week, exchange data show, as US economic data that missed estimates increased bets that the US Federal Reserve will keep interest rates lower for longer.
“Since the Fed’s attitude hasn’t changed much, foreign funds will continue to flow into emerging markets,” said Forest Chen (陳秀宜), a Taipei-based economist at Ta Chong Bank Ltd (大眾銀行). “As international oil prices rise and inflation quickens, the central bank may let the [New] Taiwan dollar strengthen since a rate increase would be of no use in this case.”
The currency has gained 0.3 percent this month and 1.8 percent since March, with Chen predicting that it may rise to NT$29.6 in the third quarter amid sustained inflows.