Asian currencies had their best week in seven months, as Japan’s monetary easing spurred inflows into the region’s assets and China’s central bank said it would widen the yuan’s trading band.
The Chinese currency rallied the most this week since October and touched a 19-year high of 6.1723 against the US dollar on Wednesday, the same day state-run media reported the limit would be expanded.
The baht reached a 16-year high on Friday as Bank of Thailand Governor Prasarn Trairatvorakul said the currency has started to move beyond its fundamentals. Global funds bought US$1.7 billion more local sovereign notes than they sold this month, Thai Bond Market Association data show.
“Foreign direct divestment is particularly strong in Southeast Asian countries like Thailand, as the return on assets is high,” said Boon Peng Ooi, chief investment officer of fixed income at Eastspring Investments Singapore. “We continue to see moderate gains in Asian currencies.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies, rose 0.5 percent this week to 117.98, the most since the period ending Sept. 14. The New Taiwan dollar rose 0.5 percent to NT$29.84, the South Korean won strengthened 1.2 percent to 1,116.30, the baht climbed 1.4 percent to 28.62 per dollar and the yuan advanced 0.24 percent to 6.1776.
The New Taiwan dollar fell on Friday as foreign institutional buying of local equities boosted demand for the local currency, dealers said.
The won’s rebound, with the South Korean currency posting its biggest weekly gain in two months, also encouraged traders in Taiwan to cut their US position amid an easing of political tensions on the Korean Peninsula, the dealers said.
The Bank of Japan (BOJ) said on April 4 it would buy ￥7.5 trillion (US$76 billion) of bonds per month. BOJ board member Ryuzo Miyao said on Thursday that he expects investors based in the world’s third-largest economy to buy more foreign debt. The baht has risen 6.8 percent against the US dollar this year, the most among Asia’s 11 most-traded currencies.
“The amount of inflows into Thai bonds is so big, while there is growing speculation Japanese investors will send more money abroad,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd in Tokyo. “An economic recovery in Japan due to these policies will also help Thailand, as Japan is one of its major export destinations.”
The yuan’s trading band is likely to be increased “in the near future,” People’s Bank of China Deputy Governor Yi Gang said on Wednesday in Washington, where finance chiefs from the Group of 20 nations were meeting to discuss exchange-rate policies.
The yuan is currently allowed to fluctuate a maximum 1 percent either side of the central bank’s daily fixing. The last expansion took effect on April 16 last year.
Elsewhere in Asia, the Philippine peso rose 0.5 percent to 41.06, Indonesia’s rupiah was steady at 9,709, while Vietnam’s dong slipped 0.2 percent to 20,900. India’s rupee strengthened 1 percent to 53.9725 through Thursday. Financial markets were closed in the country for a public holiday on Friday.
The yen weakened against its US counterpart for a third week, the longest stretch since February, as the BOJ’s stimulus policies were unopposed at a G20 meeting in Washington.
Europe’s 17-nation currency pared a loss versus the greenback as European Central Bank Governing Council member Jens Weidmann said the bank would only cut interest rates if economic data worsen.
A report next week may show eurozone manufacturing fell, a Bloomberg survey shows.
“The volatility has been higher in dollar-yen and the yen crosses than in most of the other majors,” Robert Lynch, a New York-based currency strategist at HSBC Holdings PLC, said in a telephone interview on Friday.
After Japan’s finance minister said the nation avoided G20 censure, “the market obviously took that as a signal that at least at this stage, the risk for official resistance to BOJ-aided yen weakening is less likely,” he said.
The yen fell 1.2 percent to ￥99.52 per US dollar in trading this week in New York, after touching ￥99.69, the weakest level since April 12. The yen has not weakened beyond ￥100 versus the dollar threshold since April 2009. It dropped 0.7 percent to ￥129.88 per euro. The US dollar rose 0.5 percent to US$1.3052 per euro.
The IMF trimmed its global growth forecast and urged European policymakers to use “aggressive” monetary policy as a second year of contraction leaves the eurozone’s recovery lagging behind the rest of the world.