Asian currencies posted the biggest weekly rally in almost a year as a recovery in oil prices and a further round of monetary easing boosted sentiment in emerging markets.
Nineteen of the 24 developing-nation currencies tracked by Bloomberg gained this week as oil climbed 7.7 percent, adding to a 5.8 percent advance in the previous five days. China lowered banks’ reserve requirements after November last year’s surprise interest-rate cut, joining central banks from India to Canada to Singapore in adjusting policy this year to spur growth. The European Central Bank began purchasing market assets last month just as the US is set to tighten.
“There was some recovery in oil prices, which was supportive of emerging markets,” Macquarie Bank Ltd Singapore-based head of foreign-exchange and fixed-income strategy Nizam Idris said, adding that China’s easing “may have impacted sentiment positively.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, rose 0.7 percent, the biggest gain since March last year.
The People’s Bank of China cut the reserve-requirement ratio by 0.5 percentage point effective on Thursday after the world’s second-biggest economy posted the slowest annual growth since 1990 last year. The easing is set to inject as much as 600 billion yuan (US$96.06 billion) into the banking system, Australia and New Zealand Banking Group Ltd economists estimate.
The yuan climbed to a two-week high on Friday after the central bank raised the currency’s daily fixing by 0.17 percent to 6.1261 per US dollar. The yuan is still down for this year, after losing 2.4 percent last year.
“For China, they don’t want people to think the yuan will drop too much,” Oversea-Chinese Banking Corp Singapore-based economist Tommy Xie (char request sent) said. “A stable fixing means you can’t depreciate a lot.”
The ringgit led gains this week as it is the most likely beneficiary from the oil-price rally, given that Malaysia is Asia’s only major exporter of the fuel. The currency climbed 2.3 percent, while the baht rose 0.7 percent and the won appreciated 0.4 percent.
The Malaysian government last month raised its budget-deficit target and cut its estimate for the economy’s expansion for this year amid a 49 percent slide in the price of Brent crude oil since June last year. Trade data this week that beat economists’ estimates also helped bolster the ringgit.
Elsewhere in Asia this week, the New Taiwan dollar climbed 0.2 percent from last week to end at NT$31.490 per US dollar on Friday, while the rupiah rose 0.4 percent. The rupee added 0.2 percent while the yuan rose 0.1 percent. The peso and the dong each fell 0.1 percent.
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