The Singapore dollar hit a fresh high and the South Korean won threatened to break through a 32-month peak on Wednesday, leading gains in their Asian peers, as Asian policymakers are expected to keep using firm currencies to fight inflation and the Federal Reserve is unlikely surprise the market later with a hawkish stance.
Foreign exchange authorities of some countries such as South Korea were suspected of buying dollars, but their intervention was not to reverse their currencies' strength but to slow it, dealers said. Asian currencies trimmed gains in the afternoon, but that is largely because investors covered dollar-short positions before the results of the Fed meeting and a news conference by Chairman Ben Bernanke.
Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. Asian currencies are expected to stay firm if the Fed ends QE2 as scheduled as it is unlikely to reduce liquidity, which has supported the regional currencies, some economists said. The won hovered around a 32-month high against the dollar on stop-loss dollar sales and as foreign investors continued to buy local stocks. The won strengthened to as firm as 1,078.4 per dollar, a notch below 1,078.3 hit last week, the strongest since August 2008. On April 21, the authorities were spotted forcing the won to weaken 1,080.
The Singapore dollar hit a record high against the US dollar as the central bank is expected to allow more appreciation to stem inflation. The city-state's currency firmed to as strong as 1.2300 versus the greenback, but then the gains were erased on US dollar short-covering and it turned slightly weaker. Interbank speculators and exporters lifted the ringgit to a fresh 14-year high against the dollar as the Malaysian currency has room to strengthen more to catch up with gains by other Asian currencies.