Indonesia’s rupiah firmed more than 1 percent and marked its best week since June, while other emerging Asian currencies and stock markets also gained.
The rupiah hit a four-month high against the dollar and was set to advance around 2.6 percent for the week, as Thursday’s drop in Treasury yields to near three-week lows encouraged investors to push funds into Indonesia’s high-yielding debt.
Expectations of a divided US Congress that will struggle to pass major fiscal stimulus has stoked expectations this week that the Federal Reserve will have to continue to pump more cash into the economy through bond-buying and other emergency measures.
The more quantitative easing the Fed does, the more funds are likely to trickle down to emerging markets, particularly those with attractive local bond yields.
Indonesian 10-year benchmark yields were down 25.5 basis points at 6.354 percent, the biggest fall since March 20. Bond prices rise as yields fall.
“Republican control of the Senate suggests that no major fiscal stimulus is in the offing,” said Wei Liang Chang, a macro strategist at DBS bank, Singapore.
“This has also led to a drop in US Treasury yields, which raises the attractiveness of the higher-yielding rupiah.”
Investors have also bought the yuan and other China-linked assets over the past two days on the view that a Biden presidency will mean a less hawkish trade and foreign policy.
The yuan dipped but was still set to mark its best week in a month, while Taiwan’s dollar and the Thai baht jumped 1.3 percent and 0.6 percent, respectively.
After investors dumped global equities in October ahead of the election, this week has seen most stock markets rise.
Malaysian shares and the ringgit were steady ahead of a 2021 budget announcement, seen as crucial for Prime Minister Muhyiddin Yassin as he faces threats to his government.
US bank Citi said it expected the budget to include a 28 billion ringgit ($6.76 billion) provision for COVID-19 related matters and target boosting revenue by introducing new taxes.
Trade-reliant Malaysia is in dire need of stimulus as the pandemic forced its economy into its first contraction in over a decade in the second quarter.