Most Asian currencies climbed on Wednesday, including the Singapore dollar and Taiwan dollar, as investors bet on currencies in countries where central banks are seen using exchange rates as an inflation-fighting tool. Both the Taiwan dollar and Malaysian ringgit rose by more than half a percent each.
The Taiwan currency is the top gainer in the region and has risen 6.5 percent so far this year. "On the regional foreign exchange markets, it's a broad dollar-weakness story," said Enrico Tanuwidjaja, strategist at OCBC Bank. The US dollar fell to a one-month low against a basket of currencies on Wednesday after comments from a German government official heightened expectations of higher euro zone interest rates.
"If we look at the yen and Korean won, the oil-sensitive currencies, even they gained against the greenback, while the Thai baht benefited from the neutral-turned-hawkish Bank of Thailand," Tanuwidjaja said.
The Thai central bank left interest rates unchanged at its policy meeting on Wednesday, but said it was ready to tighten monetary policy should inflation pick up later this year. The Thai baht jumped 0.7 percent to 31.86, its highest in nearly 2 weeks. Traders said the baht's climb was also due to a technical move after the currency broke resistance at the 32.50-per-dollar level.
"Another driving factor for the baht is the weaker US dollar across the board. The currency will rise before hitting a resistance level around 31.80," a trader in Bangkok said. Inflationary pressures weighed on the import-dependent region as oil prices continued their climb and reached a record high near $130 a barrel on Tuesday.
Despite concerns over the impact of rising oil prices on South Korea's economy, the won rebounded to 1,040.20 per dollar after hitting its lowest in more than two-and-a-half years as traders said they spotted the country's authorities selling dollars to curb sharp currency falls.
The won weakened to as low as 1,057.20 in early trading on oil price worries before monetary authorities were suspected of supporting the currency by selling as estimated $500 million, traders said. The currency rose as high as 1 percent in the day.
The Singapore dollar hit a two-week high at 1.3605 against a broadly weaker US dollar as investors bought the currency in anticipation that Singapore's authorities will let it rise further to quell inflation.
"The Singapore dollar is following other Asians against the US dollar, which is generally much lower," says a trader. Meanwhile, the Philippine peso, Indian rupee and Indonesian rupiah were weighed down by concerns over the impact of soaring crude prices on economic growth, with the peso hitting its lowest since November 2007.