The Taiwan dollar surged to a four-year high on Thursday, outperforming most other Asian currencies, after a plunge in oil prices bolstered the outlook for oil-importing Asian economies. The 7.5 percent drop in oil prices in New York on Wednesday led overseas investors to buy shares across Asia, pushing up the region's benchmark stock indexes and triggering further dollar sales by Asian exporters already spooked by a two-month plunge in the US currency.
The Taiwan dollar appreciated over 0.7 percent to 31.96 per dollar, strengthening beyond 32 per dollar for the first time since November 2000. The South Korean won strengthened almost half a percent to a new seven-year high of 1,041 per dollar.
"Those countries should benefit after the oil prices came off sharply," said Ashley Davies, a currency strategist at UBS in Singapore.
UBS expects the Taiwan dollar to appreciate further, along with the Indian rupee and the Singapore dollar because of their strong domestic economies which complement strong trade surpluses.
The Indian rupee surged for a fourth day to a new seven-month high against the dollar. The dollar dropped to a low of 44.08 rupees in later trades, from 44.41 on Wednesday.
The rupee's gains were pared in later deals after the central bank stepped up dollar buying and the securities regulator decided to put a cap on investment in local corporate debt by overseas institutional investors.
The Singapore dollar was trading at about 1.6320 per dollar, near a six-year high of about 1.6292 set overnight.
The rupee and the Singapore dollar have under-performed the Asian rally since the start of October on concerns that the central banks would not allow excessive strength in their currencies which could jeopardise prospects for their exporters.
The Thai baht surged half a percent to trade at a seven-month high of 39.12 per dollar, gaining for a third day, as optimism about the economy's growth prospects after the drop in oil prices added to Tuesday's better-than-expected exports data.
Christy Tan, a currency analyst at 4CAST in Singapore, said that as Asian exporters dumped their dollars, the region's currencies were likely to extend their rally through the end of the year.
That was unless central banks in Japan and South Korea jointly started buying dollars to stem the rally in their currencies.
South Korean data released on Thursday showed the authorities had intervened heavily in the currency markets in November.
That contrasted with data from Japan that showed the central bank continued to stay out of the market despite repeated warnings that it might intervene for the first time since March.
"We're not expecting further gains in the won," said UBS' Davies. "We expect the won to hold above 1,000 (per dollar) because the government will get into trouble with the large conglomerates if they allow the won to appreciate further."
The won has appreciated 14.5 percent against the dollar this year, making it the best performing Asian currency. The Taiwan dollar and the yen are the next best performers, gaining over 6 percent and 5 percent respectively.
UBS expects the Bank of Japan to intervene by the end of this year to halt the yen's gains. The yen gained on Thursday to its strongest level against the dollar since March 2000.