Singapore: Asian currencies strengthened on Wednesday after the US Federal Reserve’s aggressive policy easing a day earlier hit the dollar and boosted stocks, with the South Korean won and Indonesian rupiah leading the pack.
The volatile won jumped more than 3% at one point to 1,304.9 per US dollar, its strongest level since early November.
The won has gained 11% against the US dollar since it hit an 11-year low on 21 November, but it remains one of Asia’s worst performing currencies with a loss of 29% in year 2008.
The rupiah jumped about 2% to 10,900 per US dollar, helped by suspected central bank dollar selling.
“Investors are selling dollars after the US rate cut,” said a trader in Jakarta.
Indonesia’s central bank issued rules to curb speculation in the rupiah, banning banks from making loans or overdrafts that could be used for certain derivative transactions.
The dollar dipped towards a 13-year low against the yen and hovered above 2-1/2 month troughs against the euro, a day after the Federal Reserve slashed its federal funds rate target to a range between zero and 0.25%.
The Fed also said it would employ all available tools to promote the resumption of growth and preserve price stability.
The MSCI index of Asia Pacific stocks outside Japan rose 2.1%, taking its cue from a 4.2% rally in the Dow Jones Industrial Average on Tuesday.
Meanwhile, the Philippine peso rose as far as 46.92 per US dollar, up 1% from Tuesday’s close and hitting its highest since 2 October.
“I think the market has moved into more risk taking sentiment, thus we are seeing some peso appreciation,” said a Manila based trader. “And equities rally due to the Fed rate cut.”
The Singapore dollar briefly hit 1.4543 per US dollar, its highest since early October before retreating to 1.4568 after data showed Singapore’s non oil exports (NODX) fell a less than expected 2.8% in November from October.
“Basically, the general US dollar weakness still prevails, though there is a slight bounce after the NODX,” said a Singapore based trader.
Most Asian currencies were hit by the global market rout earlier this year but some have recovered as foreigners start to buy regional assets. Analysts say, however, the rise may have been exaggerated by thin trading volume as the year-end approaches.