The Singapore dollar hit a decade high and the Philippine peso hit a 2-week high on Tuesday, underpinned by a recovery in regional stocks and risk appetite and despite sluggishness after a US market holiday.
Investors were partly sidelined by uncertainty ahead of US consumer price data and the release of minutes of the Federal Open Market Committee (FOMC) rate meeting due later this week. "While risk appetite remains fairly sound, we think separate threads are also converging to keep the regional currencies underpinned. For example, the elections in Malaysia and Taiwan, and expectations of a removal of capital controls for the Thai baht," said Emmanuel Ng, an analyst at OCBC Bank in Singapore.
Still, the regionals stuck to moving in tight ranges. The Philippine peso hit a 2-week high at 40.55 per dollar after it rose by 0.3 percent from its previous close. "Overall theme is still one of consolidation as traders adjust positions rather than venture large bets," Vishnu Varathan at Forecast said in a note. Despite the tight ranges, the Singapore dollar hit a 10-year high of 1.4102 per US dollar before retreating to 1.4114, still finding support in the expansionary budget the Singapore government announced last week to help spur domestic demand.
OCBC Bank's Ng said the Singapore dollar was near the top of the trade-weighted policy band within which the Monetary Authority of Singapore (MAS) manages the currency. "Having said that, a positive outlook for the regional currencies may see the local authorities confining themselves to a minimal presence in the market," said Ng.
Conversely, analysts at Goldman Sachs said they expected Singapore's central bank to "increase the pace of currency appreciation to quell spiralling inflation expectations" in its next April policy meeting.
The high-yielding Indonesian rupiah initially rose by 0.2 percent to hit 9,135, matching a 3-month high figure it touched on Monday, but later retreated to levels near its previous close.
"With a wide interest differential, I think the rupiah is still much more attractive than the dollar. There was significant inflow last week and expectations are that it will come in again for government bonds," a trader in Jakarta said. Traders said they expected the currency to hold up against the dollar and strengthen further to test levels of 9,100 this week.
"We continue to see value in the Indonesian yield curve, particularly at the belly of the curve where the 5-year (bond) is currently yielding 9.20 percent, providing support for the currency despite a less attractive stock market, in our view," said a UBS note. China's central bank set a new post-revaluation high for the mid-point of the currency's trading band for the second consecutive day, pushing the yuan to 7.1534 per dollar, another post-revaluation high, and up by 0.1 percent from its previous close.
China's January inflation figures were released on Tuesday, and showed consumer price inflation hit its highest in more than 11 years. The Taiwan dollar rose by almost 0.3 percent to hit 31.6580, pressured up by local equities which rose 1.69 percent to a 1-month high.
However, the Indian rupee bucked the trend and fell by 0.4 percent, weighed down by the purchase of dollars by a state-run bank which prompted the market to take positions anticipating further weakening of the currency.