Philippine peso leads Asian currencies retreat

The Philippine peso shed half a percent against the dollar on Wednesday and other Asian currencies gave up some of last week's gains with the US market closed for a holiday and interest rate decisions in Europe ahead. The Thai baht bucked the trend, propelled to a 10-year high by capital inflows into the booming stock market.
While the peso fell to 46.04 per dollar, the Indonesian rupiah stuck to tight ranges near 9,000-per-dollar ahead of a Bank Indonesia policy meeting on Thursday. "In the near term, we will probably have some consolidation. We've got a bit of buy-on-rumour, sell-on-fact," said Claudio Piron, J.P. Morgan's currency strategist.
The Indonesian rupiah could bounce back eventually, given its gains have been thwarted this week by expectations rates will be cut, for the 13th time, he said.
The US dollar has weakened in the past few days on softer economic data and expectations the Federal Reserve will not lift rates anytime soon. Sterling hit a 26-year high versus the dollar on expectations the Bank of England will raise rates on Thursday. Analysts expect the European Central Bank to stay pat when it also reviews policy this week, but to prime markets for more rate increases later this year.
Asian high-yielders have benefited from a broader surge in risk appetite and foreign buying of regional stocks. Data from Nomura showed foreigners have bought $1.26 billion of Indian equities in the seven days to July 1 and $882 million of Taiwan stocks.
Despite Wednesday's losses, the rupiah is up 1.7 percent in a week, the won and peso have gained 0.9 percent and 1.55 percent respectively in the same period. J.P. Morgan's Piron however expected that beyond Thursday's US holiday, European arte decisions and Friday's US jobs data, the dollar would continue to decline and equity flows into Asia would underpin the regional currencies.
The Thai baht was the exception on Wednesday. It rose to a 10-year high, extending its gains for a fourth session and bucking the trend in Asia, buoyed by capital inflows into a rising stock market.
The onshore baht hit 34.17 per dollar, its highest level since August 1997. It has risen 1.3 percent in the past four sessions. "The first reason is capital inflows into the stock market, as yesterday it was at its highest in 10 years," a Bangkok-based trader said.
"The second reason is exporter panic to sell after the baht broke 34.40 support," he said. The main stock market index in Thailand hit a fresh 10-year high of 822.05 on Wednesday. Since capital controls imposed in December, baht trade has been divided between an onshore and an offshore market. The offshore baht was trading around 31.70 per dollar.