Renewed weakness in the US dollar on Tuesday pushed the Thai baht and Philippine peso towards last week's multi-month highs, triggering fresh official intervention to curb their strength. The Singapore dollar rose but its gains were also limited by suspected official dollar-buying, a day after the monetary authority kept its zero appreciation policy intact and sounded wary on the economic outlook.
Although central banks are tapping on the brakes, analysts expect the rally in Asian currencies against the dollar to continue as foreign investors flock to regional stock and bond markets on a view the economies will recover from the global downturn faster than the rest of the world.
"Intervention itself cannot stop this Asia FX rally," said Suresh Ramanathan, strategist at CIMB Investment Bank. "If policy makers need to get out of this directional play in Asia ex-Japan FX, the need is to spell out clearly a time frame for exit strategies, this at least provides the market with a framework in gauging how far Asian currencies can strengthen."
The dollar stayed weak against major currencies on Tuesday after falling overnight. Investors are shifting into higher-yielding currencies as a belief that US corporate earnings will exceed expectations boosts risk appetite. India's markets were shut for holiday.
BAHT The Thai baht firmed in early trade on Tuesday and was expected to move in a narrow range of 33.25-33.40, although dealers spotted the central bank providing support for the dollar. "The Bank of Thailand was in the market to support dollar/baht at 33.30," said a Bangkok-based trader. It reached an intraday peak of 33.25, moving close to a 14-month high struck last week of 33.22
PHILIPPINE PESO The peso rose briefly to 46.49 per dollar, up 0.3 percent from Monday's close, edging back towards last week's 2009 high of 46.45. But it soon pulled back to 46.50 as traders spotted official intervention around the day's high. "The central bank is at 46.50," said a Manila-based trader, adding the such intervention was not aggressive.
The peso has gained only 2 percent against the dollar so far this year, trailing the Indonesian rupiah, which has rallied nearly 17 percent, and the South Korean won's 8 percent gain.
SINGAPORE DOLLAR Singapore dollar gained a quarter of percent to 1.3962 per US dollar but it was capped by suspected US dollar-buying by local banks on the behalf of the central bank, some traders said. Singapore's central bank kept its zero appreciation policy on Monday was cautious about the economic outlook. The analysts forecast the Singapore dollar would rise to 1.38 to the US dollar by the end of this year and rise further to 1.34 by the end of 2010.
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