Most Asian currencies fell on Tuesday after Fed chief Ben Bernanke's warning on inflation fanned expectations of US interest rate rises this year, but central bank intervention lifted the won and the baht. The Philippine peso briefly dipped to 44.45 per dollar, down 0.7 percent from Friday's close and its weakest level since October.
Philippine markets were closed on Monday for a holiday. A trader attributed the peso's fall to a combination of domestic concerns about high oil prices and the dollar's broad rally, and suspected the central bank was again in the market to limit the peso's decline.
"I think the concerns locally are the primary driver of the weakening peso," he added. The Singapore dollar fell as far as 1.3695 to the US dollar, down 0.6 percent trade on Monday. "It's due to Bernanke's statement," said a Singapore-based trader, who expected the currency to move between 1.3645 and 1.3720 for the day.
The dollar jumped to a three-month high against the yen on Tuesday after Bernanke said on Monday that the central bank would strongly resist an erosion in inflation expectations, convincing more investors that rate hikes could come this year.
Bernanke also highlighted inflation risks from surging energy prices and that the risk of a substantial downturn in the US economy had receded, sparking broad dollar gains and sending US bond yields soaring. Meanwhile, US Treasury Secretary Paulson declined on Monday to rule out intervention in the foreign exchange market to stabilise the dollar.
Meanwhile, central banks in South Korea, India and Thailand intervened to prop up their currencies in the face of a broadly stronger dollar, traders said. The South Korean won gained as much as 1 percent to 1,021.75 to the dollar, boosted by suspected dollar sales by the foreign exchange authorities.
Despite suspected intervention by the Reserve Bank of India to support the rupee, the currency eased a fifth of a percent to 42.932 per dollar. The Thai baht, which has fallen sharply in recent sessions, rebounded almost 0.9 percent to 32.93 per dollar, as the Bank of Thailand confirmed its intervention to slow the baht's fall.
"Intervention persists," said a Bangkok-based trader. "I think they want to repel speculators." A second trader added: "If the baht breaks 33.50 level, it will move to 34.00. That means depreciation from 32.50 to 34.00 in 2 weeks, which is too fast. So they try to stabilise the baht."
The Malaysian ringgit fell a quarter of a percent to 3.272 per dollar. The Chinese yuan hit a post-revaluation high at 6.9140 per dollar amid indications that Chinese policy makers still favour using a stronger currency to fight inflation.
The central bank, which maintains a tightening policy bias despite slowing economic growth, announced over the weekend that it would raise bank reserve requirements by 1 percentage point. The yuan has gained 5.5 percent versus the dollar so far this year, the second best performer in Asia after the Taiwan dollar, which has risen 6.9 percent.