The Indian rupee continued its bull run on Wednesday, hitting a fresh nine-year high on expectations of strong capital inflows and the view that the central bank would not intervene to cap its gains.
The Philippine peso, under pressure earlier after the surprise resignation of National Treasurer Omar Cruz, bounced back to test six-year highs as investors switched their attention back to the positive economic outlook. The rupee remained in the spotlight as it strengthened through 41 per dollar for the first time in nine years, taking its gains so far this week to about 2 percent.
"There seems to be a growing perception that the easiest way to fight inflation is to let the currency strengthen," said ABN Amro currency strategist Shahab Jalinoos.
"Also, large-scale intervention could send the wrong signal to the market." Indian central bank Governor Yaga Venugopal Reddy said on Wednesday that a rising rupee did not necessarily curb inflation and some traders said the central bank could intervene sporadically in the market to slow the rupee's rise.
Malaysia's ringgit briefly hit a nine-year high just beyond 3.42 per dollar before suspected dollar-buying by the central bank capped the rally and the Singapore dollar rose as far as 1.5107 per US dollar, nearing last week's 9-1/2-year high, amid optimism about the local economy.
Singapore's influential former prime minister, Lee Kuan Yew, said late on Tuesday the economy was likely to grow at the top end of the government's forecast range of 4.5 to 6.5 percent in 2007. "There is bullishness about the economy following the comments from Lee and we are seeing a lot of cross-trades and buying of the Sing dollar," said one trader.
The peso reversed early falls to climb to 47.45 per dollar, within a whisker of Monday's six-year peak of 47.43. Dealers said the central bank was spotted in the market buying dollars for pesos, keeping the currency in check for now. The peso had fallen in early trade after news late on Tuesday that respected National Treasurer Cruz would step down at the end of May, raising worries about the Philippines' ability to meet deficit targets.
But traders said the jitters were short-lived, with the market returning its focus to the overall positive economic outlook and the potential for strong inflows into local markets. "He (Cruz) has done a good job, but there are a lot of good members of the economic team and the economic fundamentals are good," said a Manila trader. "Also, real flows such as remittances remain in favour of the peso, so any weakness is seen as a buying opportunity."
Elsewhere, the South Korean won drew some support from data showing that strong domestic demand helped the economy grow 0.9 percent in the first quarter from the previous quarter.