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(Bloomberg) -- Asia’s emerging-market currencies rose this week, led by South Korea’s won and Taiwan’s dollar, on optimism sliding oil prices will improve trade balances in the region.
Brent crude sank to the lowest since March 2009 this week and recently traded at $48.30 a barrel, less than half the average level in September. The Swiss National Bank yesterday unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro, roiling global financial markets and bolstering demand for safe-haven assets including the yen. A stronger yen makes it less likely South Korea and Taiwan, whose electronics exporters compete against the Japanese, will intervene to limit appreciation in their currencies.
“The global environment is good for currencies in Asia because of what’s been happening with the price of oil,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “Declining oil is improving the external positions of Asian countries that are net oil importers, which is everybody except Malaysia.”
The won and Taiwan’s dollar both gained 1.1 percent against the greenback this week as of 11:04 a.m. in Hong Kong. The yen advanced 2.1 percent. The Philippine peso and Thailand’s baht appreciated 0.6 percent, while Malaysia’s ringgit retreated 0.1 percent. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.3 percent.
Switzerland’s central bank ended a cap of 1.20 franc per euro on Jan. 15 and reduced the interest rate on sight deposits. The franc appreciated as much as 41 percent versus the euro after the decision.
“The Swiss have shot themselves in the foot with this by allowing their currency to appreciate by 20 percent while everyone else is trying to depreciate,” said Michael Every, head of Asia Pacific financial-markets research at Rabobank International in Hong Kong. “It’s going to be an extremely volatile year.”
Demand for Asian currencies was also supported by data showing a bigger-than-expected drop in U.S. retails sales in December, which pared bets of a Federal Reserve interest-rate increase. Futures indicate a 59 percent chance of a June move by the Fed, compared with 69.7 percent a week ago.
India’s rupee strengthened 0.4 percent this week, spurred by Reserve Bank of India’s surprise interest-rate cut at an unscheduled review on Thursday in Mumbai.
Elsewhere in Asia, Indonesia’s rupiah rose 0.6 percent, China’s yuan advanced 0.2 percent and Vietnam’s dong climbed 0.1 percent.
--With assistance from Yudith Ho in Jakarta.
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