JAKARTA (Reuters): Asian currencies surged on Friday, with Indonesia's rupiah and South Korea's won leading the charge against a weakening dollar as disappointing US economic indicators cemented expectations for more Federal Reserve interest rate cuts this year.
The rupiah strengthened as much as 0.7% to 16,395 per dollar, staging a notable recovery despite being the region's worst performer year-to-date with losses exceeding 2%. The unit was last up 0.5%.
"The rupiah is playing catch up to the recovery of other Asian currencies, after an extended bout of underperformance, riding also on better sentiments in the onshore stock market," said Radhika Rao, senior economist at DBS Bank.
Jakarta's benchmark index climbed 0.6% on Friday, extending its winning streak to a fifth consecutive week with a robust 4% advance since Monday.
With inflation still within the target range, policymakers have room to reinforce their pro-growth stance with an interest rate cut this month, Rao said. Bank Indonesia will deliver its policy decision on Wednesday, and analysts anticipate rates will remain unchanged.
Other regional currencies also advanced, with the Malaysian ringgit and Philippine peso gaining 0.2% and 0.4%, respectively, while the Thai baht added 0.2%.
The South Korean won rose 0.5%, advancing for a fourth consecutive session in its third straight week of gains.
The currency broke through the psychologically important 1,400 level on Wednesday with a 1.8% surge following talks between South Korea and the US to discuss the dollar/won market on May 5.
The sharp movement mirrors the Taiwanese dollar's early-May rally, when it surged 6% over two days.
On Friday, it edged up 0.2%, heading for a seventh consecutive weekly rise.
This week had kicked off optimistically after the U.S.-China trade truce, which initially boosted the dollar, but the momentum quickly faded, leaving most currencies trading sideways.
By 0719 GMT, the US dollar index fell 0.2% to 100.61 points, though it was up 0.2% for the week.
The greenback struggled to recover after Thursday's slide following unexpected US producer price declines in April, which followed earlier benign consumer price data, strengthening expectations for at least two Fed rate cuts this year.
The MSCI emerging market currency index held steady on Friday but was poised for its fifth consecutive weekly gain, up 0.4%.
India's rupee traded flat, but was down 0.3% for the week.
Bankers attributed the weakness to persistent dollar demand for immediate payments from a large state-run bank and two major foreign banks, after an earlier boost from the India-Pakistan truce.
Regional equity markets cooled in the final days of the week after gains fuelled by the US-China trade agreement.
Bangkok shares rose over 0.3% while Seoul and Taipei added 0.2% and 0.5%, respectively.
Manila and Singapore stocks traded flat. The MSCI emerging Asian equities gauge was largely unchanged but has gained more than 3% this week, on track for its fifth straight weekly advance. - Reuters
