The New Taiwan dollar and the won led Asia’s emerging-market currencies up this week, spurred by optimism that sliding oil prices will improve regional trade balances.
Brent crude sank to the lowest since March 2009 this week and recently traded at US$48.80 a barrel, less than half its average level in September last year.
Meanwhile, the Swiss National Bank on Thursday unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro, roiling global financial markets and bolstering demand for safe-haven assets, including the yen.
A stronger yen makes it less likely Taiwan and South Korea, whose electronics exporters compete against Japan’s, will intervene to limit appreciation in their currencies.
“The global environment is good for currencies in Asia because of what’s been happening with the price of oil,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “Declining oil is improving the external positions of Asian countries that are net oil importers, which is everybody except Malaysia.”
The won rose 1.2 percent, while Taiwan’s dollar gained 0.9 percent against the greenback this week.
The Taiwanese currency rose the most since July last year as the US dollar retreated after data prompted investors to pare bets for US interest rate increases.
“US data were disappointing, so investors have pushed back the expected timing of a rate hike,” KGI Securities Investment Advisory Co Ltd (凱基證券投顧) president Chu Yen-min (朱晏民) said.
The NT dollar strengthened 0.9 percent from Jan. 9 to post its best weekly performance since the five days through July 12 last year, rising to NT$31.645 against its US counterpart, Taipei Forex Inc prices show.
The local currency climbed 0.5 percent on Friday, the biggest daily advance since August last year.
On Thursday, Switzerland’s central bank ended a cap of SF1.20 per euro and reduced the interest rate on sight deposits. The franc rose as much as 41 percent versus the euro after the decision, which supported demand for Asian currencies.
“The Swiss have shot themselves in the foot with this by allowing their currency to appreciate by 20 percent while everyone else is trying to depreciate,” said Michael Every, head of Asia-Pacific area financial markets research at Rabobank International in Hong Kong. “It’s going to be an extremely volatile year.”
Demand for Asian currencies was also supported by the disappointing US data, which showed a bigger-than-expected drop in US retails sales last month, which pared bets of a US Federal Reserve interest rate increase.
In India, the rupee strengthened 0.6 percent this week, spurred by the Reserve Bank of India’s surprise interest rate cut at an unscheduled review in Mumbai on Thursday.
Elsewhere in the region, the yen gained 1.8 percent, the baht climbed 0.7 percent, the Philippine peso appreciated 0.6 percent, Indonesia’s rupiah rose 0.5 percent this week, the yuan was little changed, the dong added 0.1 percent and Malaysia’s ringgit strengthened 0.1 percent.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active units — excluding the yen — rose 0.3 percent.
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