SINGAPORE: Regional currencies in Asia inched higher on Monday on expectations central bank will focus on inflation-control amid clear signs of progress in tackling atomic crisis in Japan and on higher oil prices.
China's central bank set the yuan's mid-point at a record high, indicating it will use exchange rates as inflation-fighting tool after surprisingly raising banks' required reserves on Friday.
"Most countries seem willing to accept more appreciation to curb imported inflation," said Pin Ru Tan, emerging markets currency and rates strategist at the Royal Bank of Scotland in Singapore.
Last week, Asian foreign exchange authorities tried to stem falls in their currencies by selling dollars in a bid to contain inflation from higher prices in imported goods despite worries about the impact on the global economy from the devastating earthquake and worries about radiation leak.
With oil prices jumping on Western's strike to Libya, Asian central banks may be more keen on stemming inflation, analysts said.
"Focus in Asia is going back to local fundamentals, in particular the inflation story... This week we have the BSP, which is likely to starts its very late hiking cycle," said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong.
Earlier, the World bank said inflation was the major short-term challenge for East Asia and the tighter monetary policy were needed.
Still, currency market players remained wary of possible dollar-buying intervention to check speed of strength in their currencies, after the G7 intervention against the yen last week.
"Central banks will be cautious about allowing rapid appreciation given the volatile environment. So we will expect them to intervene, though only to slow rather than reverse FX appreciation," says a US bank currency strategist in Singapore.
SINGAPORE DOLLAR
The Singapore dollar strengthened past 1.2700, which the Monetary Authority of Singapore (MAS) had been spotted defending, on heavy demand from funds and speculators.
The MAS has not seen buying the US dollar to check the local currency's strength yet, dealers said.
Rekindled expectations for the city-state's tightening in April and firm local stocks provided more support, although some talk of offers from real money capped its gains.
RUPIAH
The rupiah hit a fresh four-year high against the dollar on exporters' demand for settlements.
The Indonesian currency strengthened to as firm as 8,725 versus the greenback, the firmest level since May 2007 hit.
Earlier, a finance ministry official said investors demand appeared strong for the country's global bond planned for this year.
The central bank had not been spotted buying dollars initially, but later some state banks were seen purchasing dollars, dealers said.
RINGGIT
The Malaysian ringgit gained 0.5 percent as interbank speculators cleared dollar-long positions which they had built on higher oil prices.
The ringgit also found support from speculation of further currency liberalization by the central bank.
Traders said there is heavy speculation the central bank will allow markets to short the dollar/ringgit in onshore swaps when it releases their annual report this Wednesday.
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