The Singapore dollar hit a record high on Wednesday as investors bet on currencies of countries deemed to have inflation-fighting credentials, while the South Korean won pared losses from its previous session. The firm Asian currencies were also given a boost by the euro's rise to a fresh record high against the dollar on Tuesday.
"The Singapore dollar and the Malaysian ringgit are lead gainers, partially because the euro hit a new high after the European Central Bank indicated a hawkish view, which has somewhat weakened the dollar, with spill-over to Asian markets," said Enrico Tanuwidjaja, a strategist at OCBC Bank.
The US dollar was generally lower on Wednesday, including against the Australian dollar, which bolted to a 24-year high following strong inflation figures. Other currencies in the region kept to tight ranges against the dollar, capped by concerns about the rising cost of oil as US crude oil hovered above $118 a barrel, close to record prices hit on Tuesday.
"Higher oil prices may continue to pose a drag on currencies like the Korean won, Philippine peso, the Indian rupee and the Indonesian rupiah," Tanuwidjaja said. Despite the rise in oil prices, the won rose by 0.8 percent to 991.10 per dollar as exporters chased the local currency for financial settlements, which prompted investors to sell the dollar.
The won has lost 1.5 percent in the past two weeks in volatile trading. Investors placed their bets on the Singapore dollar, which rose 0.3 percent to a record high of 1.3472 per US dollar early in the day and remained close to that level for the rest of the session. Singapore's March inflation data showed that prices rose 6.7 percent from a year ago, a 26-year high.
The currency was propped up by expectations the central bank would allow further currency appreciation to ease inflationary pressures, traders said. "The US dollar is still heavy, and the Singapore dollar is below 1.3500 and on the way to 1.3450, though momentum may be slow," a Singapore-based trader said.
Earlier this month the Monetary Authority of Singapore (MAS) shifted up the centre of the secret trade-weighted trading band of the Singapore dollar, its main policy tool.
The Malaysian ringgit was among those because the central bank appeared to be allowing the currency to appreciate. It rose by 0.3 percent to 3.1305, hitting its highest since October 1997 for a second consecutive day. The Indonesian rupiah meanwhile fell 0.3 percent to 9,220.The country's statistics bureau said annual inflation in April would be the highest since at least September 2006.