SEOUL - The Philippine peso touched an eight-month high on Wednesday with most emerging Asian currencies up on lower U.S. Treasury yields, while the yuan rose as China and the United States began annual high-level talks.
The peso gained 0.2 percent to 43.34 per dollar, its strongest since Nov. 8.
Foreign and local investors have been buying Philippine bonds on expectations of a monetary policy tightening.
Growing price pressures fanned the view that the Bangko Sentral ng Pilipinas will raise interest rates for the first time in three years as soon as its July 31 meeting, even though June inflation slightly slowed.
"That plays a big factor, so I'd try to sell (dollar for the peso) here," said a Philippine bank trader in Manila.
Still, caution grew over possible intervention by the central bank to stem the currency's appreciation, traders said.
The caution prompted some traders to take profit in the peso.
"I will look to lighten short dollar positions very soon. The downside is becoming less and less attractive now," said another senior local bank trader, adding intervention may become more aggressive.
But the authority has not been spotted in the market yet as corporate dollar demand limited the peso's upside, he said.
Meanwhile, the rupiah appreciated in offshore markets in non-deliverable forwards as Indonesians started voting in a presidential election.
Spot yuan hit a three-month high after the central bank fixed its midpoint stronger. Earlier, U.S. Treasury Secretary Jack Lew said that moving to a market-determined exchange rate will be a crucial step for China.
"Expectations of a rate hike in some Asian countries, such as the Philippines, will keep supporting carry trades," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul.
Malaysia's central bank is also expected to raise interest rates on Thursday, a Reuters poll showed.
"There are not such views in other countries, but their rates are already higher than the West, so the trend may continue," Park added.
The dollar stayed under pressure as long-dated U.S. Treasury yields fell on Tuesday in New York.
Investors are awaiting minutes of the Federal Reserve's latest policy meeting and speeches by European Central Bank officials, including President Mario Draghi.
The Taiwan dollar rose as local exporters bought the currency for settlements when it was weaker than 29.900 against the U.S. unit.
Some foreign financial institutions also bought the Taiwan dollar this morning, but the amount was small amid weaker domestic equities, traders said.
Local oil companies purchased the U.S. dollar for payments around 29.900, limiting gains in the island's currency, traders added.