The Philippine peso rose to fresh eight-month highs on Monday, powered by a continuing flow of foreign money into its stock markets. Other Asian currencies were also higher, supported by expectations that the region will be pressured to revalue currencies at a meeting of the Group of Seven leading industrial nations early next month. Those expectations propped up the Japanese yen and lifted the Asians off Friday's lows, despite the prospects of rate rises in the United States boosting the dollar and a rise in oil prices.
The Philippine peso rose to 55.35 a dollar, a level last seen in May 2004. The main stock index crossed the 2,000 mark for the first time in almost five years and has risen 10 percent in about 10 days.
"The stock market is looking alive again. That has not happened in a while," said Rovic De Guzman, head of trading at the Union Bank of the Philippines.
De Guzman brushed off last week's news that Finance Secretary Juanita Amatong would resign and be replaced by Trade Secretary Cesar Purisima.
"Amatong's resignation was scheduled," he said.
But foreigners were net sellers of Taiwan stocks on Monday, evidence that investors were probably redistributing their assets from the preferred markets of 2004.
The Singapore dollar was quoted in a range of 1.6320 to 1.6350, nearly a cent off Friday's trough.
The Korean won also rose as foreigners were reported to have turned buyers of Korean equities after heavy selling late last week. The won was quoted around 1,032 a dollar, but stayed clear of seven-year highs near 1,030 struck last week.
The G7 meets in London on February 4 and 5. Finance ministers from Russia, India, Brazil, South Africa and China have been invited for talks.
Some analysts believed Asian currencies would be bid up heading into the meeting as there might be a stronger call for the region to unshackle its currencies and share in the adjustment of bulging US deficits.
Others said it was likely this G7 meeting would be no different from the others in recent past, at the most producing a statement calling for more global currency flexibility, and the rally would fizzle out.
The speculation however supported the Chinese yuan and the Malaysian ringgit in offshore non-deliverable forward markets, even as regional markets braced for continued dollar-buying intervention by central banks in South Korea, Singapore and Taiwan.
Elsewhere, the turmoil in the Korean bond market gave markets another reason to worry that Asia's best performing currency in 2004 would not fare so well this year.
The won has barely moved since the start of the year, and the Indonesian rupiah has taken over as lead gainer in Asia.
Korean bonds fell sharply on Friday on heightened worries over the government's issuance plans, but steadied on Monday after some official assurances.
Those plans, with issuance totalling nearly $8 billion in January, have caused three-year benchmark bond yields to rise 60 basis points since the beginning of 2005.
Analysts worry not merely because of the huge amount of bonds Korea plans to issue to offset its currency intervention, but also the likely exit of foreigners from the fixed income markets.
The won also had other factors stacking up against it, he said.
"There is the Koreans' stomach for substantial intervention and the reason for intervention," he said, citing the sluggish domestic economy.
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