SINGAPORE: The Philippine peso hit a two-month high on Wednesday on views that the country may use the currency to fight inflation and the South Korean won flirted with a nearby 34-month peak as there was no sign Seoul was buying dollars.
Demand by real money accounts lifted most emerging Asian currencies, suggesting inflows to the region may continue over the medium term after the dame kind of investors cut exposure to the region last month.
The Philippine central bank (BSP) was spotted buying dollars, but they appeared to just slow down the peso's strength, not to defend a certain level, dealers said, after data on Tuesday showed the country's price pressures have been greater than previously reported.
"This morning BSP gave the cue when they stepped aside at 43.00. So BSP interventions more like leaning against the wind to limit the speed rather than a committed line in the sand," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.
"Imported inflation seems to be a focus for now and using PHP to restrain it," he said, adding that the intervention could still substantially contain the appreciation.
Still, he sees the peso seen strengthening past this year's high of 42.635 per dollar by the end of August, barring no external shocks or line in the sand by BSP.
This year, unlike before, Asian foreign exchange authorities have allowed their currencies to strengthen in order to fight inflation, especially prices pressure from imports, although they have been spotted buying dollars to slow the gains.
The interventions have been seen just as efforts to contain gains, not to reverse a market trend or to defend certain levels, dealers said.
South Korea, which dealers said had intervened earlier this month, was not spotted buying dollars on Wednesday, despite heightening caution over their steps as the won threatened to touch a 34-month high hit on Monday.
Seoul has pledged to focus policy on stabilizing prices and there has been speculation among traders that the government was allowing the won's appreciation as a way to cushion imported inflation as overall consumer inflation stays stubbornly above the upper ceiling of the central bank's target.
The stance, which most Asian policymakers have taken, is seen supporting emerging Asian currencies, along with inflows to the region that has stronger economic fundamentals than developed markets have.
The regional units are expected to keep enjoying investment flows, although these may dip on concerns over the euro zone's debt crisis and a slowing global economy, analysts and dealers said.
"The market remains happy to sell USD/Asia bounces. We continue to see net equity inflows, perhaps a fresh quarter is seeing new money get put to work," said Westpac currency strategist Jonathan Cavenagh in Singapore.
PESO
The peso gained up to 0.5 percent to 42.83 per dollar, the strongest since May 4 on macro funds' demand and stop-loss dollar sales.
One-year dollar/peso non-deliverable forwards (NDFs) also slid 0.4 percent to 43.170, the lowest since June 10, catching up with the spot move.
Interbank speculators had built dollar-long positions on views that the central bank would defend the 43.00 line for the spot, but they had to clear those positions when no intervention was spotted at that level.
http://economictimes.indiatimes.com/markets/forex/peso-at-2-mth-high-on-policy-view-won-near-34-mth-peak/articleshow/9124211.cms
