With the yen under pressure, regional currencies extended gains with the Singapore dollar hitting its strongest value in more than two and a half years against the Japanese currency. On Wednesday, the Bank of Japan began its regular two-day policy meeting at which sources said it will decide to take further easing steps. It will also consider adopting a 2 percent inflation target no later than in January in response to calls from the incoming prime minister, Shinzo Abe, for the bank to make stronger efforts to beat deflation.
Markets have already priced in BoJ action on Thursday with 14 out of 19 economists polled by Reuters last week expecting further easing via an increase in asset purchases. "It seems fresh capital will inevitably find its way into the region," said Jonathan Cavenagh, a senior FX strategist at Westpac in a note, adding the Bank of Japan is likely to ramp up its balance sheet in the period ahead.
The Taiwan dollar gained on demand from exporters for settlements, although the bids were not that strong with investors wary of possible intervention by the central bank, dealers said. The ringgit rose against the US dollar as investors bought the Malaysian currency versus the Singapore dollar to take profit from the city-state's unit.
The Malaysian unit advanced 0.2 percent to 2.5039 to the Singapore dollar. On Tuesday, the ringgit hit a three-month low of 2.5099 to the neighbouring currency. But investors placed orders to buy the Singapore dollar between 1.2200 to the greenback and 1.2210 as the local unit is seen heading to this year's peak of 1.2152 hit on October 17.