Asian currencies complete best quarter since 2004

A sian currencies had their biggest quarterly advance since 2004, as the world’s fastest economic growth lured funds to the region and yuan appreciation made policymakers more tolerant of gains.

The Bloomberg-JPMorgan Asia Dollar Index closed yesterday at a two-year high and stock markets in India, South Korea and Taiwan, since the end of August attracted more than $11 billion from overseas. China’s yuan yesterday reached its strongest level since 1993, while Thailand’s baht and Malaysia’s ringgit on Thursday touched 13-year highs.

“Asia benefits from the move out of slowing developed markets into developing markets,” said Douglas Borthwick, Stamford, Connecticut-based managing director and head of foreign-exchange trading at Faros Trading LLC. “Other central banks in the region that are also conducting daily interventions and smoothing efforts will continue to follow China’s lead, slowly allowing their currencies to strengthen.”

The Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, was 3.6 per cent higher for the quarter as of 4:14 pm in Hong Kong. South Korea’s won has strengthened 7.2 per cent to 1,140.20 versus the greenback and the baht gained 6.7 per cent to 30.36, the region’s best performances. All of Asia’s 10 most-used currencies appreciated.

Asia’s developing economies will expand 9.2 per cent in 2010, outpacing growth of 2.6 per cent in advanced countries, the International Monetary Fund forecast in July. The Manila-based Asian Development Bank on September 28 raised this year’s growth forecast for the region to 8.2 per cent from an April estimate of 7.5 per cent.

Yuan gains
The Chinese government will “further improve” its excha nge-rate mechanism and “increase the flexibility” of the yuan, the People’s Bank of China said yesterday. The US House of Representatives later voted 348-79 for a measure that would let domestic companies petition for duties on imports from China to compensate for the effect of a weak yuan.