The Taiwanese dollar and the South Korean won strengthened on Thursday, driven by exporters' demand for their own currencies and broad-based weakness in the US dollar. Asian currencies are expected to stay firm in 2011, thanks to sustained high economic growth and speculation that monetary authorities in the region will let their currencies strengthen more because of increasing inflation risks.
"I would expect that the regional currencies will rise further in 2011. While they have intervened to limit appreciation of their currency, emerging Asian FX authorities will tolerate further appreciation as a way to contain inflation," said David Cohen, an economist at Action Economics in Singapore.
The path of for many Asian currencies though will not be a straight line up. Asian countries will probably keep trying to check gains in their currencies to maintain export competitiveness, analysts said. "The 2011 will be another year for emerging Asia. But I don't think Asian authorities will just stand still despite higher inflation. They will do whatever is necessary to prevent jumps in their currencies, including intervention and capital controls," said June Park, an economist at Woori Investment & Securities in Seoul.
Taiwan central bank was spotted buying dollars to check the Taiwan dollar's strength and the country's market regulator said it would start looking into the operations of foreign capital in the country. The Taiwan dollar rose more than 4 percent to a fresh 13-year high against the US dollar, due to US dollar selling by foreign investors and exporters.
The Taiwan dollar strengthened to as firm as 29.185 per dollar, the strongest since October 1997, from its previous close of 30.367. The won hit the highest in more than three weeks against the dollar, breaking through resistance at 1,140 per dollar on exporters' demand for settlements. The local currency strengthened to as firm as 1,133.2 per dollar, the strongest since December 7.
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