Asian Currencies Advance After Fed Maintains Stimulus Policies

By David Yong

Oct. 25 (Bloomberg) -- Asian currencies strengthened as regional stocks snapped a four-day slump after the Federal Reserve said it will maintain pro-growth policies to support a recovery in the world's largest economy.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-active Asian currencies outside of Japan, rose toward an eight-month high set on Oct. 18. The Fed yesterday repeated interest rates may stay near zero at least through mid-2015 and kept unchanged a bond-purchase plan unveiled last month. China's yuan hit a 19-year high and Malaysia's ringgit climbed the most in a week on optimism the U.S. central bank's policies will support demand for higher-yielding assets.

"We expect Asian currencies to continue to show moderate strength," said Roy Teo, a foreign-exchange strategist in Singapore at ABN Amro Bank NV. "The Fed will keep buying bonds, maybe add Treasuries to its purchases, to support growth."

The ringgit gained 0.4 percent to 3.0490 per dollar as of 11:10 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. Taiwan's dollar appreciated 0.3 percent to NT$29.266 and the won climbed 0.2 percent to 1,102.10.

The Fed called U.S. growth "moderate" and maintained its open-ended program to buy $40 billion of mortgage-backed bonds a month, after a two-day policy meeting in Washington yesterday.

Foreign investors have plowed almost $8 billion into the stock markets of India, South Korea and Indonesia since the program was announced on Sept. 13, exchange data show.

U.S. Recovery

The Asia Dollar Index rose 0.14 percent, the most in a week, while its 60-day historical volatility fell to 2.17 percent from 2.30 percent. New home sales in America rose 5.7 percent last month, the most since April 2010, a report showed yesterday.

"Expectations that the U.S. will continue to grow have helped improve risk appetite," said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore.

"The better home sales data in the U.S. also helped."
China's yuan gained 0.08 percent to 6.2428 per dollar after rising as high as 6.2424, the strongest level since the government unified the official and market exchange rates at the end of 1993. The central bank set its daily yuan reference rate stronger for the first time in five days.

'Support the Yuan'

"We are seeing more bets on a rebound in China's growth in the coming quarters," said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. "The weakness in the dollar will also support the yuan as the Fed continues with quantitative easing."

The Philippine peso was steady at 41.348 per dollar. Fourteen of 21 economists in a Bloomberg survey forecast the central bank will cut its overnight rate to 3.5 percent from 3.75 percent today. Seven expect no change. The decision is due at about 4 p.m. local time.

Elsewhere, Thailand's baht rose 0.1 percent to 30.69 per dollar. Indonesia's rupiah fell 0.2 percent to 9,624 and Vietnam's dong was steady at 20,850. Financial markets in Malaysia, Indonesia, Philippines and Singapore will be closed tomorrow for a holiday.