Won leads Asian currency gains as Fed signals slower tightening

HONG KONG (Bloomberg) - South Korea's won and Indonesia's rupiah led gains in Asian currencies after the Federal Reserve signalled slower U.S. interest-rate increases than previously forecast.

The Bloomberg JPMorgan Asia Dollar Index, a gauge of 10 regional currencies, climbed 0.1 per cent Thursday, rising for a fourth day. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell the most in six years Wednesday after the Fed opened the door to the first rate increase in almost a decade. The central bank dropped an assurance it will be "patient" in tightening policy and lowered projections for the benchmark and economic growth.

"Bets on the greenback's gains declined sharply as expectations of early U.S. rate increases moderated," said Hong Seok Chan, a Seoul-based currency analyst at Daishin Economy Research Institute.

The won rose 1.5 per cent to 1,112.93 a dollar as of 11:24 a.m. in Seoul, the biggest gain since November 2011. Indonesia's rupiah rose 1.2 per cent, the most since July 7, to 13,005 versus the greenback.

The Sing dollar is trading at 1.3789 as at 11.44 am, up 1 per cent from Wedensday.

Taiwan's dollar climbed 0.7 per cent to 31.42. China's yuan was poised for its biggest three-day rally since 2007.

Malaysia's ringgit gained 0.8 per cent to 3.6778 a dollar and Vietnam's dong advanced 0.2 per cent to 21,468.

The Bank of Korea, which met Thursday to discuss the Fed's statement, said it will closely monitor possible increases in financial and currency-market volatility and take measures if needed.

The yuan strengthened 0.42 per cent to 6.2036 a dollar in Shanghai, extending a three-day advance to 0.95 per cent. China is in talks with the International Monetary Fund to include the yuan in the institution's basket of reserve currencies, People's Bank of China Deputy Governor Yi Gang said in Beijing on March 12. The central bank raised the currency's daily reference rate by the most since Feb. 6 on Thursday.

"It's obviously a Fed-driven move," said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank. "The fundamentals are still bullish for the yuan, with the government's plan to make it a reserve currency," he said, adding that the PBOC's fixings also send a "strong signal" that the authorities favor a stable currency.

Thailand's baht climbed 0.6 per cent to 32.728 a dollar. The currency earlier rose as much as 0.9 perc ent, the most since September 2013.

Indonesia's rupiah led losses in Southeast Asia last week, falling 1.7 per cent. Bank Indonesia pledged to "beef up measures" to stabilize the rupiah as it held interest rates on Tuesday, a change from February when it cut rates and signaled it would tolerate currency weakness.