The Philippine peso rose on Thursday after Standard & Poor's raised its credit rating on the country to one notch below investment grade, but other emerging Asian currencies were mixed as investors awaited a rate decision by the European Central Bank.
The Indian rupee fell on weak investor response at an auction for debt limits for foreign institutional investors on Wednesday, while the South Korean won edged up on demand from offshore funds. A Reuters poll of economists showed a majority expect the ECB to cut its main interest rate by 25 basis points to 0.75 percent on Thursday, while money market traders are evenly split on whether the central bank will cut the deposit rate, a separate survey showed.
Late on Wednesday, S&P upgraded the long-term sovereign credit rating of the Philippines to BB plus from BB with a stable outlook late, a move likely to boost bonds and currency trades and further lift an equity market that has hit new record highs this week. The move helped push the peso up as much as 0.6 percent to 41.600 to the dollar on Thursday, though it later pared gains on caution over possible dollar-buying inteervention by the central bank "The market is being cautious right now as they suspect agent banks (of the central bank) of supporting the dollar and after a dollar-short squeeze yesterday. Traders are just sitting on offers but not trying to push dollar/peso lower," said a European bank dealer in Manila.
"But I would assume that there will be fresh inflows, especially in the fixed income market. The equity market would also rally with the upgrade," the dealer said, adding he was looking to buy the peso on dips. "It is sort of priced in as Fitch has them at BB plus," said BNP Paribas currency strategist Thio Chin Loo in Singapore, adding that the peso was expected to stay firm with a target of 40.00 by end of this year.
The peso is the best performing emerging Asian currency so far this year with a 5.2 percent gain against the dollar, thanks to inflows. Dollar/ringgit rose as interbank players covered short positions before the ECB's rate decision. Its rise came as Asian shares and the euro slid. Dollar/ringgit is seen facing a technical resistance at 3.1700, where the daily Icimoku kijun line and tenkan line sit, dealers said.
A Malaysian bank dealer said market players will sell the pair again when it approaches the level. Dollar/won started the local trade higher, but it turned lower as offshore model funds sold the pair in tepid trading, dealers said. Exporters also joined the offers and some interbank players cut long positions. But South Korean importers also bought it for payments on dips.