Asian currencies were poised for the best start to a year since 2006 after investors poured money into the region to take advantage of higher interest rates and a faster pace of economic growth than in developed nations.

Five-year benchmark bonds in Taiwan, Thailand and South Korea yielded 0.93%, 3.07% and 3.48%, respectively, compared with 0.75% for similar-maturity Treasuries. Malaysia’s central bank will probably leave borrowing costs at 3% on 31 January, according to all 15 economists surveyed by Bloomberg, more than the near-zero rates available in the US.

“Funds are flowing into stocks and bonds amid some improvement in liquidity,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank in Tokyo. “There’s yield advantage as the Federal Reserve is likely to keep its rate near zero for a while.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed about 1.7% in January in Hong Kong. India’s rupee jumped 6.6% in January to close at 49.80 per US dollar on 30 January, headed for the biggest monthly gain in the region, and South Korea’s won rose 2.5% to 1,124.55, according to data compiled by Bloomberg.

Overseas investors purchased US$9.1 billion more Indian, South Korean and Taiwanese equities than they sold this month, according to exchange data.

IMF Outlook

The Fed signalled it will keep interest rates low through late 2014, while India’s policy rate is 8.5% and Indonesia’s 6%.

Foreign funds boosted holdings of Indonesia’s government debt by 7.6 trillion rupiah (US$843 million) to 230.4 trillion rupiah this month through 27 January, a four-month high, after Southeast Asia’s largest economy won an investment-grade rating of Baa3 from Moody’s Investors Service on 18 January.

Developing Asia may expand 7.3% this year, compared with 1.8% in the US and a contraction of 0.5% in the euro zone, according to estimates by the International Monetary Fund on 24 January.

Malaysia’s ringgit advanced 4.2% in January to 3.0440 per US dollar, the best month in almost two years. The central bank said it would relax rules on interest-rate derivatives, debt and foreign-exchange trading.

“The decision to further liberalise the foreign-exchange market is positive for the currency,” said Enrico Tanuwidjaja, a senior currency analyst in Singapore at Malayan Banking. “Foreign interest in Malaysian assets is quite healthy.”

China Manufacturing

The yuan was poised for a monthly decline on speculation China will limit gains to protect exporters as global economic growth falters. The currency fell 0.4% to 6.3190 per US dollar in Shanghai, according to the China Foreign Exchange Trade System.

China released its manufacturing purchasing managers’ index for January at 50.5 on 1 February. Economists surveyed by Bloomberg had estimated the gauge to be at 49.6, compared with 50.3 in December. Fifty is the dividing line between contraction and expansion. People’s Bank of China adviser Li Daokui said there are signs the yuan is near its equilibrium level, Xinhua News Agency reported.

“Investors are worried about China’s export outlook as the European debt crisis lingers,” said Banny Lam, a Hong Kong-based economist at CCB International Securities, a unit of China’s second-largest bank. “Possible capital outflows also add to the concern.”

Elsewhere, the Philippine peso appreciated 2.3% in January to 42.870 per US dollar, Thailand’s baht climbed 1.8% to 31.01 and Indonesia’s rupiah rose 0.7% to 9,001. Taiwan’s dollar climbed 2.5 % to NT$29.545.