SINGAPORE - The South Korean won hit a 16-month high on Friday to cap the best year since the global financial crisis and led gains among emerging Asian currencies, with a brighter 2013 outlook for regional units with hopes for more inflows to the area.
The won ended this year's local session up 7.6 percent against the dollar, its largest annual percentage gain since 2009. Inflows to South Korea's stocks and bonds, as well as continuous demand from exporters, powered the won.
The Philippine peso and the Singapore dollar followed the won with a 6.7 percent rise to the greenback and a 6.1 percent appreciation, respectively, according to Thomson Reuters data.
Emerging Asian currencies are expected to advance more next year as investors are likely to keep looking for higher yields on more policy stimulus from developed countries, especially if U.S. politicians reach a deal to avoid a fiscal crunch, dealers and analysts said.
Regional authorities will try to slow down rises in their currencies, but intervention by central banks may not be successful, they added.
"Now all eyes are on the fiscal cliff but I feel that market is being a little complacent, maybe justifiably because of all the liquidity out there," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia (CBA) in Singapore.
"Once fiscal cliff gets resolved, even partially, next year looks like a good year for Asia FX. The fact that the U.S. dollar doesn't get lifted up with just a week to go before we go over the cliff is just a indication of what is coming next year," Ji added.
U.S. President Barack Obama and lawmakers are launching a last round of budget talks before a New Year's deadline to reach a deal or watch the economy go off a "fiscal cliff," that economists fear will push the United States back into recession and stamp out fragile signs of recovery elsewhere.
Despite concerns over the fiscal crunch, investors have dared to add bullish bets on emerging Asian currencies on more policy stimulus by major central banks.
Japan's new government continued to press the Bank of Japan (BOJ) for drastic easing to fight deflation, while the Federal Reserve announced new round of monetary stimulus in December.
On expectations for the BOJ's more policy steps, the won has jumped 21.6 percent to the yen this year, the largest annual gain since 1998, according to Thomson Reuters data.
The Singapore dollar also has leaped 19.0 percent versus the Japanese currency.
The Philippine peso edged up as interbank speculators reduced dollar holdings on the last local trading day of 2012.
Some investors cleared dollar-long positions, which they had built up after the central bank announced on Wednesday it will impose limits on local and foreign banks' forward positions to slow down the peso's strength.
"It's not going to happen this year to bet on the new rules to push the dollar higher. It seems that market pretty much anticipated the move," said a foreign bank dealer in Manila.
Currency investors shrugged off data showing Philippine import in October rose 4.3 percent from a year ago, the fastest rise in four months.