Risk of intervention remains alive

Bangkok: Asian currencies rose for a sixth week, the longest winning streak in a year, on speculation the Federal Reserve will pump more money into its economy, increasing funds available to invest in higher-yielding assets.

The currencies retreated from their highs on Friday on concern regional central banks will intervene or introduce measures to stem gains.

Thailand's baht fell from a 13-year high, dropping 0.7 per cent to 30.08 per dollar in Bangkok on Friday and trimming its five-day appreciation to 0.5 per cent, according to data compiled by Bloomberg. South Korea's won declined 0.5 per cent to 1,120.15, paring its weekly gain to 0.9 per cent.

"The basic trend remains for Asian currencies to strengthen due to fund inflows and the economic growth story," Tohru Nishihama, an economist at Dai-ichi Life Research Institute in Tokyo, said.

Reducing the impact

"Given the very fast appreciation in regional currencies recently, we may see intervention from some central banks."

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-traded currencies excluding the yen, rose 0.1 per cent from a week ago to 115.10.

It reached 115.46 on Oct-ober 7, the highest level in more than two years.

Thailand's Prime Minister Abhisit Vejjajiva said the Cabinet will consider measures this week to help reduce the impact from the baht's strength. Japan last month intervened in the foreign-exchange market for the first time in six years to rein in yen gains.

Regulators in South Korea are due to start an audit of lenders handling currency derivatives on October 19.

Asia's developing economies will expand 9.4 per cent in 2010, outpacing growth of 2.7 per cent in advanced countries, the International Monetary Fund forecast on October 6.

Overseas investors have pumped more than a net $37 billion into Indian, South Korean and Taiwanese equities this year, according to exchange data.

Taiwan's dollar completed a sixth weekly gain after the government on October 7 reported an 11th straight increase in monthly exports for September.

"Hot money is a global problem because everyone is doing quantitative easing, especially in America," said Albert Lee, a fixed-income trader at Cathay United Bank in Taipei.

"More money is coming out. This money has got to go somewhere and it is going to Asia."

China's yuan rose to the highest level against the dollar since 1993 Friday on speculation the country will let the currency strengthen more quickly as international leaders step up calls for faster appreciation.

The yuan gained 0.3 per cent to 6.6734 from September 30, the last trading day before a weeklong holiday.