The Indonesian rupiah caught up rather late with the Asian currency rally on Wednesday in anticipation of a debt moratorium by Paris Club creditors, while the Philippine peso was boosted by expectations of foreign investment flows. Other Asian currencies also rose as the US dollar extended its decline against the yen and euro ahead of trade data and after the European Central Bank's chief economist said the regionals should bear more of the burden of the dollar's weakness.
In addition, US Commerce Secretary Don Evans, on an official visit to China, said China ought to have a market-driven exchange rate policy.
Those factors and comments pushed up the premium on the offshore yuan and drove up the Asian currencies.
The Taiwan dollar and the Thai baht rose over a quarter percent each.
The Indonesian rupiah was the top performer, rising one percent to a one-month high of 9,180 per dollar in late deals.
It had been a regional laggard, but rallied on news that the Paris Club of government creditors would approve on Wednesday a moratorium on debt payments for countries hit by the tsunami disaster.
Economists at IDEAglobal.com said in a note any debt moratorium would have a huge impact on Indonesia's balance of payments, while the dissipation of political risk should bring inflows into Indonesia's stock and bond markets.
Besides, the supply-side nature of inflation and the desire to spur domestic demand will preclude any rate rises, and the central bank would not intervene to stop rupiah appreciation, which would help offset inflation, IDEAglobal said.
Elsewhere, the Philippine peso rallied past the 56 per dollar level to its strongest in nearly five months on Wednesday on expectations of foreign investment inflows and renewed US dollar weakness. The peso hit 55.85 per dollar, its highest since late August and a rise of 0.4 percent from Tuesday.
A Manila-based trader said operators sold dollars in anticipation of the funds Japan's Kirin Brewery Co Ltd would bring into the Philippines to fund its $156 million purchase of an increased stake in San Miguel Corp.
The Korean won rose to 1,038 per dollar. Some of Tuesday's bullishness, which drove a one percent rise in the currency, wore off after the central bank said the funds for Standard Chartered Plc.'s $3.3 billion acquisition of Korea First Bank would bypass the market.
Chinese yuan non-deliverable forwards moved to price in a higher premium on the yuan after the ECB's chief economist, Otmar Issing, said Asian currencies, and China in particular, had more room than the euro to bear the burden of the dollar's weakness.
One-year NDFs were quoted at 4,350 points, anticipating a 5.6 percent appreciation in the yuan.
"Markets will continue to speculate on a potential revaluation of the renminbi and the comments from Issing will clearly keep that issue at the forefront of the markets' mind," said Greg Gibbs, a strategist with the Royal Bank of Canada.
That premium had fallen to 4.7 percent last week from a peak of 6.4 percent in the final days of 2004, when operators were speculating on a policy change over the year-end holiday period.
The yuan is effectively pegged around 8.28 per US dollar, a level the United States and other industrialised nations say keeps the currency undervalued and gives China an edge in exports.
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