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Malaysia Ringgit, Indonesia Rupiah surge after Fed minutes

(Reuters) – Emerging Asian currencies rallied on Friday and were set to post weekly gains as minutes of the Federal Reserve’s latest meeting undermined expectations of a U.S. interest rate hike this year, leading investors to seek higher yields in the region. Indonesia’s rupiah jumped more than 4 percent to enjoy the best week in more than 14 years, on capital inflows. The ringgit rose more than 3 percent in thin trading to report the largest weekly gain since Malaysia pegged the currency in September 1998, helped by higher oil prices. Other emerging Asian currencies also advanced as the minutes of the Fed’s September meeting on Thursday showed that the U.S. central bank held off a long-anticipated rate increase to make sure that a global economic slowdown would not threaten the U.S. recovery. The minutes came as prospects for an imminent Fed rate hike had already waned after disappointing U.S. jobs data on Oct 2, helping emerging Asian currencies rebound. "It’s more a question of maybe the flight from emerging markets has been a little bit overdone and there’s a lot of investors that quickly need to get back in soon as things start looking better and that’s what we’re seeing here especially in dollar/Asia," said Jesper Bargmann, head of trading for Nordea Bank in Singapore. "So much money left EM, maybe now that volatilities are coming in a little bit and things are calming down a bit, money is finding its way back in." Emerging countries across the world suffered capital outflows on expectations of higher U.S. interest rates in 2015 and a deepening slump in China’s economy. WORST PERFORMERS STRIKE BACK Diminishing views on the Fed’s rate increase caused investors to rush to unwind bearish bets on emerging Asian currencies. The ringgit and the rupiah, two worst-performing Asian currencies so far in 2015 benefited most this week. The rupiah has gained 9.9 percent against the dollar throughout this week, which would be the largest weekly gain since July 2001, according to Thomson Reuters data. Custodian banks bought the Indonesian currency as Jakarta stocks jumped 2.5 percent, well outpacing regional peers. Investors stayed cautious over possible intervention by the central bank to prop up the second-worst performing Asian currency further. A Jakarta-based currency trader said state-run banks on Friday bought the rupiah around 13,550 per dollar. Other traders said it was not clear the state-run banks’ activity was related to Bank Indonesia. Earlier, Bank Indonesia deputy governor Mirza Aditya told Reuters that the central bank is comfortable for the rupiah to strengthen past 13,500. The ringgit has risen 7.0 percent so far this week, which would be the largest weekly appreciation since September 1998 when Malaysia pegged the currency at 3.8000 against the dollar until 2005. The ringgit found support as a rebound in global crude prices eased concerns over Malaysia’s overseas earnings from oil and gas sales. August exports also rose more than expected. Thailand’s baht has advanced 2.6 percent so far this week, which would be the largest weekly gains since September 2013, on inflows to buy stocks. Thai finance minister said on Wednesday the billions of dollars of government stimulus should push economic growth above 3 percent in 2016. Optimism in the region helped the Singapore dollar to resist expectations of further easing by the central bank next week. The city-state’s currency has risen 2.2 percent this week, which would be the largest weekly gain since October 2011. The Philippine peso has gained 1.9 percent for the week, while the South Korean won reported a similar weekly appreciation. Still, such performances are unlikely to be a start of a long-term appreciation trend, analysts said. "We still see challenging times ahead for Asian currencies as slowing growth, deleveraging and prospects for further policy easing ultimately see depreciation pressure return," Khoon Goh, senior FX strategist for ANZ, wrote in a note. CURRENCIES VS U.S. DOLLAR Change on the day at 0525 GMT Currency Latest bid Previous day Pct Move Japan yen 119.97 119.94 -0.03 Sing dlr 1.4017 1.4044 +0.19 Taiwan dlr 32.838 32.872 +0.10 *Korean won 1159.00 1159.00 +0.64 Baht 35.63 35.98 +0.98 Peso 45.91 46.11 +0.44 Rupiah 13320.00 13860.00 +4.05 Rupee 64.83 65.05 +0.35 Ringgit 4.1200 4.2355 +2.80 Yuan 6.3487 6.3537 +0.08 Change so far in 2015 Currency Latest bid End prev year Pct Move Japan yen 119.97 119.66 -0.26 Sing dlr 1.4017 1.3260 -5.40 Taiwan dlr 32.838 31.718 -3.41 Korean won 1159.00 1099.30 -5.15 Baht 35.63 32.90 -7.66 Peso 45.91 44.72 -2.59 Rupiah 13320.00 12380.00 -7.06 Rupee 64.83 63.03 -2.77 Ringgit 4.1200 3.4965 -15.13 Yuan 6.3487 6.2040 -2.28 * South Korean financial markets are closed for a holiday. Markets will resume trade on Monday, Oct 12.

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