SINGAPORE: The Taiwan dollar hit a seven-month high on Friday as exporters and foreign investors bought it in the absence of intervention so far, leading gains among emerging Asian currencies, while they also found support from easing by Japan's central bank.
Earlier, the Bank of Japan (BOJ) eased monetary policy by expanding its asset-boosting government bond purchases by 10 trillion yen ($124 billion), more than markets had expected, and said it would buy longer-term government bonds.
After the decision, emerging Asian currencies hit session highs against the yen, with investors expected to use the cheap Japanese currency to buy higher-yielding units in developing markets.
The step, along with expectations for more stimulus by the Federal Reserve, is seen supporting emerging Asian currencies, dealers and analysts said.
"The prospect of sustained liquidity, much like the after effects of (Fed Chairman Ben) Bernanke's comments earlier this week, may underpin risk appetite while also strengthening the role of the yen as a funding currency," said Emmanuel Ng, foreign exchange strategist at OCBC Bank in Singapore.
Ng said that emerging Asian currencies will find support, but only marginally.
"There are bigger monsters in the closet now I guess, including sovereign and fiscal risks in the euro zone," he added.
On Thursday, Standard & Poor's cut Spain's ratings by two notches to BBB-plus due to the country's deteriorating public finances.
Most emerging Asian currencies are set to see weekly gains as Bernanke said on Wednesday the Fed would not hesitate to launch another round of bond purchases if the economy were to weaken.
Currency players increased positions in most emerging Asian currencies in mid-April, doubling positions in the Singapore dollar to the highest level in nearly three months and quadrupling their bets on the Chinese yuan, a Reuters poll showed on Thursday.
The Taiwan dollar outperformed its regional peers for the week, having risen nearly 1 percent versus the US dollar so far this week, according to Reuters data.
If the island's currency maintains the gain, that would be largest weekly gains since the week ended on Feb 5, the data showed.
It strengthened to as firm as 29.240 versus the greenback, the strongest since Sept. 9.