SINGAPORE - Asian currencies advanced to a 14-year high after European leaders pledged more aid for Greece, easing concern the debt crisis will worsen and bolstering demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-traded currencies excluding the yen, reached the highest level since August 1997 and completed a weekly gain after the 159 billion euro ($229 billion) package was announced. China's yuan rose to a 17-year high on Friday, the Philippine peso reached a three-year peak and South Korea's won touched the strongest level since August 2008.

"It's quite clear that the risk environment has improved significantly as the European summit agreement has helped to calm fears over the debt problems in Europe," said Moh Siong Sim, a currency strategist at Bank of Singapore Ltd.

The peso strengthened 1.3 percent last week to 42.403 against the dollar in Manila, according to data compiled by Bloomberg. Malaysia's ringgit appreciated 1 percent to 2.9755, Thailand's baht climbed 0.8 percent to 29.83, Singapore's dollar added 0.8 percent to S$1.2091 and the won rose 0.6 percent to 1,051.98.

The ringgit reached a two-month high on speculation the central bank will raise borrowing costs after Governor Zeti Akhtar Aziz said curbing inflation is a priority. Consumer prices in Malaysia rose to a two-year high of 3.5 percent in June, according to official data released on July 20.

Fundamentals positive

"The ringgit could hold on to its strength as there are growing expectations that the Malaysian central bank will raise its policy rate," said Calbert Loh, head of treasury at Bangkok Bank Bhd in Kuala Lumpur.

The peso gained the most this week since September 2010 after the International Monetary Fund said on July 20 that the near-term outlook for the Philippines was favorable.

"The fundamentals, growth prospects and the fiscal side remain positive in the Philippines," said Lito Biacora, vice-president for treasury at Bank of the Philippine Islands in Manila.

The baht had a third weekly advance as overseas investors added to their holdings of the nation's stocks. Global funds bought $370 million more Thai equities than they sold last week through July 21, taking this month's net purchases to $762 million.

Indonesia's rupiah appreciated 0.3 percent last week to 8,523 a dollar after Fitch Ratings said on July 19 that the country may achieve an investment-grade credit rating before the end of next year. Fitch rates Indonesia BB+, one step below investment grade.

The yuan posted its biggest weekly gain in three months after the central bank signaled it favors a stronger currency to curb inflation. The currency advanced 0.27 percent to 6.4455 a dollar.

Elsewhere, the Taiwan dollar strengthened 0.2 percent last week to NT$28.83 against its US counterpart and India's rupee added 0.3 percent to 44.3950.

Bloomberg News