Asian currencies posted their biggest weekly advance since 2012, led by China’s yuan, as the US Federal Reserve indicated it was in no hurry to raise interest rates.
A gauge of US dollar strength plunged the most in 20 months this week as Fed officials signaled borrowing costs would rise at a slower pace than previously forecast and Fed Chair Janet Yellen said the central bank would remain “highly accommodative” even after it starts increasing them.
The median estimate for the federal funds rate at the end of the year was cut to 0.625 percent, from its December forecast of 1.125 percent. The US dollar gauge is still up 18 percent in the past year.
“While the dollar continues to be strong, I don’t think it’s going to rise at the same pace as before,” said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong.
“The fundamentals in Asia are still quite strong” and inflows into some regional bond and equity markets have “still been quite strong,” he said.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, climbed 0.7 percent from March 13, the most since September 2012, as of 5:07pm in Hong Kong.
The yuan climbed 0.9 percent in Shanghai, Indonesia’s rupiah jumped 0.6 percent in its biggest weekly gain in two months and South Korea’s won rose 0.5 percent.
South Korea drew US$1.3 billion of equity inflows this week, the most since August, while Taiwan and Thailand also recorded net share purchases by global funds, exchange data compiled by Bloomberg show.
The New Taiwan dollar rose 0.5 percent to NT$31.548 from NT$31.71 the previous week.
The yuan recorded its biggest weekly gain since 2007. The government will ensure economic expansion, while pressing ahead with reforms and increasing the yuan’s convertibility under the capital account, Chinese Premier Li Keqiang (李克強) said on Sunday.
Malaysia’s ringgit declined 1.3 percent this week as crude prices slid to a six-year low, reducing earnings for the oil-exporting economy.
A deteriorating current-account surplus exposes Malaysia to volatility in investor sentiment, Andrew Colquhoun, head of Asia-Pacific sovereign ratings at Fitch Ratings, said on Wednesday, adding that the nation’s credit rating is “more than 50 percent likely” to be downgraded.
Elsewhere in Asia, Thailand’s baht rose 0.6 percent this week and India’s rupee climbed 0.7 percent, while Vietnam’s dong lost 0.4 percent and the Philippine peso dropped 1.2 percent.
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