Asian markets extend gains as Fed’s extended pause boosts confidence

Emerging Asian stocks jumped on Friday, and the Philippine peso and South Korean won led a rally among currencies, as investor confidence steadily improved on hopes that the U.S. Federal Reserve has finished raising rates.

Singapore’s main share index jumped 2%, on course for their biggest daily gain since Feb 3. Shares in Philippines and Thailand gained around 1.1% each.

Investor confidence in U.S. bonds improved as the Fed left rates on hold this week and markets cheered a lower-than-expected supply of longer-dated bonds.

The benchmark 10-year U.S. Treasury yields slid to three-week lows on Thursday, driven by a renewed demand for longer-dated bonds as confidence grew.

In currency markets, the South Korean won advanced 1.6%, set for its biggest gain since March 23. It was also on track to break five consecutive weekly losses.

Christopher Wong, OCBC’s currency analyst, said falling U.S. yields lent a “breathing space” to emerging markets, with high beta (highly volatile) currencies like the won benefiting the most.

However, the won still has depreciated 4.3% so far this year and is among the worst performing Asian currencies.

Data on Thursday showed the South Korea’s foreign reserves fell in October to the lowest level in more than three years, with authorities trying to curb the currency’s weakness.

The Philippine peso rose by 1%, its best daily gain since July 27 and closing out the week in the green.

Indonesian rupiah firmed 0.5% and was on track to snap an eight-week losing streak. The rupiah’s weakness has prompted the Bank Indonesia to intervene in the foreign exchange market multiple times in the past and even deliver a surprise rate hike earlier in the month to shore up the currency and tamp down imported inflation.

In Malaysia, the central bank in its policy meeting on Thursday kept interest rates steady for the third consecutive time, warning of risks to the growth outlook and assuring it will manage heightened market volatility.

“It seems to us that there is little impetus to raise interest rates as an avenue for currency stability and mitigate the rupiah drop,” Maybank analysts said.

The ringgit added 0.3%, ending the week with a 0.8% jump. It was also set to halt losses made in last nine sessions in a row. But it has still depreciated some 7% so far this year. Shares in Kuala Lumpur were up 0.6%.

Markets now await U.S. payrolls data, a key data point expected to set the tone for the Fed’s monetary policy.

HIGHLIGHTS:

** Thailand needs more resilience for sustainable growth – c.bank chief

** Indonesia c.bank to strengthen measures so rupiah reflects fundamentals – finmin

** Mexico central bank to lenders: help those hurt by Hurricane Otis – Reuters