Spain rating hold, US earnings lift Philippine Peso & Asian Foreign eXchange; intervention seen

Emerging Asian currencies led by the Korean won and the Philippine peso hit new highs on Wednesday as concerns over the global economy eased after strong U..S. corporate earnings and a credit ratings affirmation for Spain.

Traders said the potential for further gains was limited, with central banks seen as stepping into the market to stem the rise of the currencies, which make exports more expensive.

The South Korean won hit a one-year high, while the Taiwan dollar climbed a five-month peak on inflows from foreign financial inflows.

The Philippine peso reached its highest in more than five and half years, but it gave up some of the gains after the central bank was spotted buying dollars, traders said.

The Singapore dollar barely moved on similar intervention by the authority, dealers said.

Asian stocks also rose on Wednesday, boosted by Moody's decision to retain Spain's investment grade rating, assuaging widespread fears that it would be cut to junk status.

Strong earnings from US firms also improved risk appetite.

"The positive sentiment appears to be sustained," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong.

"However, Asian policy makers may not want to see their currencies too strong. I expect them to jump into the market trying to cap currency strength," she added.

Emerging Asian countries heavily rely on exports and the recent slowing global economy, especially China, has kept investors from chasing regional assets including currencies.

The risk sentiment is likely to depend on China's third-quarter growth due on Thursday.

Still, Credit Agricole's Cheung said slowing growth in the world's second-largest economy may not much deter a firm trend in emerging Asian currencies.

"There could be downside risk from China GDP, but the data may not be very worrying, given China's recent yuan-fixing," Cheung said.

The People's Bank of China has been fixing the yuan's mid-point firmer, helping the currency hit record highs, even though its economy has cooled.

TAIWAN DOLLAR

The Taiwan dollar strengthened to 29.142 to the US dollar, its highest since May 2 on inflows from foreign financial institutions.

Its upside was limited as the island's importers including oil companies bought greenbacks, dealers said.

The central bank was spotted intervening to stem the Taiwan dollar's strength, but its US dollar bids were not that strong, they added.

KOREAN WON

The won advanced for a fifth consecutive session to hit 1,103.3 per dollar, its strongest since Oct. 31.

The South Korean currency is seen heading to the previous peak of 1,100, given improving risk appetite, but investors stayed cautious over possible dollar-buying intervention by the foreign exchange authorities.

Importers bought dollars for payments on dips, while some offshore funds took profits.

"We may see the 1,100. But not that soon. Exporters are not active enough to push the won there," said a foreign bank dealer in Seoul.

PHILIPPINE PESO (₱)

The Philippine peso jumped to ₱41.160 to the dollar, its strongest since March 2008, on remittance inflows and solid economic fundamentals.

The peso found some resistance as the central bank was spotted buying greenbacks below 41.20, prompting offshore funds and interbank speculators to chase dollars, dealers said.

But some dealers saw the peso's retreat as opportunities to buy the local unit on dips.

"Market sentiment is still to sell the dollar on rallies. So any bounce to 41.30 would be a chance to either reinstate or add on to short-dollar positions," said a foreign bank dealer in Manila.

RINGGIT

The ringgit hit 3.0390 per dollar, its firmest since Sept. 14, as interbank speculators chased the local currency, tracking a firm euro and other risky assets.

Still, the Malaysian unit could not extend gains as the Singapore dollar was capped by spotted intervention.

SINGAPORE DOLLAR

The Singapore dollar barely changed as the central bank was spotted buying US dollar to stem the local unit's strength, dealers said.

Agent banks of the Monetary Authority of Singapore were seen preventing the city-state's currency from strengthening past 1.2180 to the greenback, according to dealers.

The intervention came as Singapore reported a surprise drop in non-oil domestic exports in September, disappointing market expectations of a slight growth.

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