Most emerging Asian currencies rose on Friday and were headed for weekly gains after the European Central Bank's new bond-buying programme increased risk appetites, though caution before key data from the US and China capped gains. The Taiwan dollar hit a two-month high on demand from foreign banks and the South Korean won touched a near four-week peak. The Philippine peso reached its strongest in more than a month.
ECB President Mario Draghi, backing up his pledge to do whatever it takes to the save the euro, announced a new and potentially unlimited bond-buying programme aimed at lowering painfully high borrowing costs of indebted members on Thursday. "Risk is back on as the ECB did deliver measures," said BNP Paribas currency strategist Thio Chin Loo in Singapore, expecting emerging Asian currencies to rise further.
As of 0725 GMT, the peso had gained 0.8 percent versus the greenback this week with the Singapore dollar up 0.7 percent, according to Thomson Reuters' data. Amid such worries, the won could not fully enjoy a sovereign upgrading late on Thursday from Fitch Ratings. South Korean importers also bought dollars, preventing the won from strengthening past 1,130 per dollar, traders said.
Caution over possible intervention by regional authorities to help their export-dependent economies may also check upside of emerging Asian currencies, dealers and analysts said. Gains in the Singapore dollar and the Taiwan dollar were capped by market talk of intervention by their central banks, dealers said. The Taiwan dollar rallied to 29.77 per US dollar, its strongest since July 6 on demand by foreign banks after the ECB's decision.
The island's central bank was spotted buying the US dollar at 29.78-29.80 to slow the local unit's strength, increasing caution over its intervention, dealers said. Such intervention caused some foreign banks to take profits from the Taiwan dollar. But the authority may temporarily allow the Taiwan dollar to strengthen to 29.75 versus the greenback until the Fed meeting next week, dealers added.
The won advanced to 1,129.0 per dollar, its strongest since August 14, but South Korean importers bought dollars for payments, cutting its gains. Offshore funds also joined the importers, especially when the local unit was firmer than 1,130, dealers said. Those dollar bids came even after Fitch raised South Korea's government bond rating to AA- from A+, rating the country a notch above China, Japan and Taiwan. Interbank speculators lifted the Philippine peso to 41.70 per dollar, the local unit's strongest since August 6, according to Thomson Reuters data.
"It was more of euphoria after the ECB brought a bazooka to a gun fight. But after the dust settles, it will be back to economics again," said a European bank dealer in Manila. The ringgit rose 0.3 percent, while traders took profits before the US and China data. A Kuala Lumpur-based dealer said few investors wanted to add ringgit holdings when it was firmer than 3.1100 per dollar, given a slowing global economy.