The Philippine peso hit a 2-1/2-year high on Wednesday, underpinned by year-end inflows of remittances from Filipinos working overseas and expectations of a credit rating upgrade in the new year.
Other Asian currencies were steady against the US dollar in thin trading as low yields pushed the Japanese yen down as far as 117.49 per dollar. It traded at 117.13.
The peso traded as high as 53.03 a dollar, up a quarter of a percent from Tuesday and at its highest level since May 2003. It has gained over 6 percent in the past three months, making it Asia's best performer this year.
Dealers in Manila said most of the remittance inflows appeared to be over for the year, giving little reason for the central bank to intervene at this stage to stem the dollar's decline against the peso.
"We have seen the lows for the dollar for the year," said Marcelo Ayes, a currency trader at Equitable PCI Bank in Manila.
"We could even see some recovery in the dollar to 54 levels as remittance flows decline. We're already seeing some commercial demand for dollars."
Remittances from Filipinos working overseas, which are normally heavy in the final months of the year and especially in the weeks leading up to Christmas, slowed to a trickle this week. Philippine markets were closed for a holiday on Monday and will close for another holiday on Friday. The foreign exchange market will hold a half-day trading session on Thursday.
The Philippine central bank said on Tuesday remittances from Filipinos working overseas were expected to hit $10.7 billion this year, $400 million higher than its earlier estimate. Remittances in January to October were $8.83 billion, or 27 percent higher than a year earlier and above the 2004 total of $8.55 billion, central bank data showed.
Philip Wee, DBS Bank's currency strategist, said he expected the peso to gain 2 percent to 52 per dollar by the end of 2006.
"We are generally optimistic about the peso, which could witness a re-rating on improving fiscal prospects," he said. Ayes at Equitable PCI Bank expects the currency to strengthen to 52 some time in March but only after a downturn in the first two months of the year.
He expects the government to issue dollar-denominated international bonds in February to coincide with any credit-rating upgrade so that they can be issued at comparatively low yields. The dollar bonds should help lift the peso, he said. "We could see some (dollar) supply come in February," he said.
The Korean won closed local trading little changed at 1,012.6 a dollar, edging back from a 4-1/2-month high on Tuesday, as South Korea's stock index came off this week's record high.
Dealers suspected dollar-buying intervention by the authorities to check the currency's two-month surge that had boosted it from a 10-month low of 1,062.4 on October 24.
The Singapore dollar was quoted around 1.6650/58 per US dollar, having come off last week's four-month peak of 1.6600.
The Taiwan dollar closed local trading at 33.107 per dollar, close to its three-month high hit on Monday. Foreign investors have been net buyers of local stocks on all but one day this month. Net foreign buying jumped to 125.3 billion Taiwan dollars on Wednesday, compared with an average 5.3 billion in the previous 19 sessions this month , after Salomon Smith Barney clients bought TSMC shares in a bulk deal.
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