Asian currencies rose for a second week as optimism that US lawmakers will raise the debt limit to avoid a default spurred demand for riskier assets.
Indonesia’s rupiah led the advance, climbing 1.4 percent from a week ago to 11,365 per US dollar, as the Bloomberg-JPMorgan Asia Dollar Index increased 0.2 percent from Oct. 4.
The MSCI Asia Pacific Index climbed for a fourth day on Friday — the longest winning streak since Sept. 12 — after Republicans in the US House of Representatives proposed a short-term increase in the debt ceiling that would push the lapse of US borrowing authority from Thursday next week to Nov. 22.
“Markets are pricing in some kind of resolution in the US, therefore there is some modest positioning for Asian currencies,” said Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank Ltd. “When it happens, Asian currencies will bump up quite aggressively. The week started with some concern.”
In Taipei, the New Taiwan dollar added 0.04 percent this week to end on Friday at NT$29.490, compared with NT$29.502 on Friday last week.
The greenback fell against the NT dollar on Friday, shedding NT$0.058 as traders took cues from the gains posted by other regional currencies pushed by fund inflows to cut greenback holdings, dealers said.
As with recent sessions, the central bank stepped in to prop up the US dollar, helping the currency recover most of its earlier losses by the end of the session.
It was the first time the US dollar fell below the NT$29.50 mark since Jan. 25, when the greenback ended at NT$29.250.
Elsewhere in Asia, India’s rupee appreciated 0.6 percent to 61.08, Malaysia’s ringgit gained 0.1 percent to 3.1788 and China’s yuan fell 0.03 percent to 6.1220.
The rupiah completed a second week of gains after Bank Indonesia set guidelines on Wednesday for individuals and companies — including state-owned firms — to hedge against currency swings.
Having a current account deficit of between 2.5 percent and 2.7 percent of GDP next year would be “acceptable,” compared with 4.4 percent in the second quarter of this year, Bank Indonesia Senior Deputy Governor Mirza Adityaswara said on Friday.
In other parts of the region, South Korea’s won fell 0.1 percent this week to end at 1,071.40, while the Philippine peso lost 0.2 percent to 43.145, the Thai baht was little changed at 31.283 and Vietnam’s dong rose 0.1 percent to 21,095.
The optimism about a US resolution that boosted Asian currencies also propped up the US dollar, which rose for the first time in six weeks amid growing speculation that a compromise will be reached.
The yen fell the most since August versus the greenback as demand for Japan’s currency as a refuge ebbed amid optimism that the US deadlock would be broken.
The Bloomberg US Dollar Index, which tracks the greenback against 10 other major currencies, gained 0.2 percent to 1,012.38 this week in New York and touched a three-week high of 1,015.74 on Thursday.
The US dollar climbed 1.1 percent this week, the most since the five days ended on Aug. 23, to ￥98.58 and appreciated 0.1 percent to US$1.3544 per euro after weakening on Thursday last week to an eight-month low of US$1.3646. Europe’s 17-nation shared currency gained 1 percent to ￥133.51.
Sterling declined for a second week versus the dollar and euro after British industrial production unexpectedly shrank by 1.1 percent in August. It gained 0.1 percent in the previous month.
There was a “sense of disappointment” in the data, which “weighed on the pound,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd, said by telephone on Tuesday. “The pace of economic recovery in the UK may prove slightly less robust than anticipated.”
Sterling also weakened after a report on Friday showed UK construction slipped 0.1 percent in August. Economists in a Bloomberg survey had estimated a 0.8 percent increase.
The pound depreciated 0.3 percent to US$1.5957, falling to as low as US$1.5914, its weakest level since Sept. 18. Sterling declined 0.3 percent to ￡0.8410 per euro.