Asian currencies were unable to resist the pull of a stronger yen on Friday, strengthening ahead of weekend meetings of OPEC and G7 finance ministers that could further improve sentiment on regional foreign exchange next week.
The yen had strengthened in offshore trade, and after a quiet morning, rallied again to be almost 1.5 percent stronger against the dollar. Regionals were reluctant to follow but still edged ahead, with solid rises in stock markets underpinning the gains.
Tokyo's Nikkei average rose 1.92 percent on Friday, Seoul's KOSPI index gained 2.42 percent and Taiwan's main stock index ended up 2.57 percent. Markets in Hong Kong and Singapore were up over one percent in late trade.
In currencies, the strongest performer was the Singapore dollar, which at one pointed had gained about 0.5 percent to hit a two-week high of 1.7115 per dollar.
The Korean won's gains were tempered by suspected intervention, while the Thai baht and Philippine peso ended flat.
Analysts said that while some of the factors that had unsettled asset markets in recent weeks were waning in influence, the broad tone was still cautious. "On the margins I think some of these concerns around things like a China slowdown, higher oil prices, even geopolitics seem to be moderating," JP Morgan currency strategist James Malcolm said.
Other factors such as the election turmoil in India and the inauguration of President Chen Shui-bian in Taiwan had contributed to choppy trade in Asia this week, and currency markets were still tentative and lacking real direction.
"When we look at what we are seeing to be moving markets, it's very much trading dominated. There are very few end-users coming in to put any sort of sizeable risk to work," Malcolm said.
As an example, he said the yen's rally to two-week highs through 112 yen was driven by small orders from proprietary houses and interbank flows that were quickly closed out. "It's not like your seeing real-money accounts and hedge funds and things coming in," Malcolm said. Markets were also waiting on two weekend meetings, which could set some direction for major currencies next week.
Ministers from the Organisation of Petroleum Exporting Countries will meet in Amsterdam on Saturday to discuss a Saudi proposal to raise production quotas.
"If oil prices do come down following this weekend's meeting, it should spell a better tone for equity markets in Asia next week and therefore Asian currencies," BNP Paribas senior currency strategist Thio Chin Loo said.
Finance ministers from the Group of Seven leading industrial nations meet in New York over the weekend. Exchange rates are not expected to be a major topic, in contrast to meetings since last September where Asia has come under pressure to allow currency strength.
The Taiwan dollar ended firmer on Friday, taking encouragement from advances in the Japanese yen and a slowdown in foreign net selling of local equities.
The local dollar closed at T$33.549 to the US dollar on the main Taipei Forex Inc exchange, gaining on Thursday's T$33.617 finish. On the smaller Cosmos exchange, the Taiwan unit firmed to T$33.553 from T$33.615.
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