Asian currencies stayed in their recent ranges on Wednesday though the Philippines peso slid despite higher oil prices, but they may come under pressure if the regional policymakers do not take more steps to stem inflation, analysts said. The South Korean won is particularly likely to weaken below its recent range if the Bank of Korea does not raise interest rates even after the country's consumer inflation in February rose faster than expected to hit a 27-month high, they said.
With the recent jump in oil prices, investors had reduced bets on the Bank of Korea's interest rate hike this month as higher oil prices may hurt Asia's fourth-largest economy. Despite higher than expected inflation data along with stronger export figures on Tuesday, the three-year treasury bond futures fell merely 0.04 points, although one-year won interest rate swaps rose to 3.57 percent from 3.54 percent.
The won lost 0.7 percent against the dollar in February while the rupiah gained 2.7 percent. Dollar/won was barely changed as exporters such as shipbuilders and auto makers sold the pair for settlements. Daewoo Shipbuilding said it had won a 1.2 trillion won ($1.07 billion) drillship order from Europe, prompting investors to expect more supplies of dollar/won.
Dollar/peso rose as local investors covered dollar-short positions on higher oil prices, though its gains were limited by remittance flows, dealers said. Investors are keeping an eye on the central bank's next move especially as it abandoned its dovish stance, saying the scope for keeping rates steady has narrowed with inflation expectations on the rise, signalling a rate increase may come as early as this month. But Philippine Finance Secretary said a policy rate was not necessary given current conditions. If the central bank does not increase interest rates, dollar/peso may rise more as the market has already begun to price in an increase, a Manila-based dealer said.
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