Won nears 34-month peak, peso climbs

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. 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 stregnthen in order to fight inflation, especially prices pressure from imports, although they have been spotted buying dollars to slow the gains. The regional units are expected to keep enjoying investment flows, although these may dip on concerns over the eurozone's debt crisis and a slowing global economy, analysts and dealers said.
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. The South Korean currency is expected to head to a firm resistance of 1,057, the dollar/won's high on July 2, 2008, days before the pair fell below the 1,000 line. Foreign investors extended stock buying for a sixth straight session.