Moody's Investment Service yesterday said that second round effects of high inflation has set in the Philippines.

The ratings agency said the Bangko Sentral ng Pilipinas cannot keep on selling dollars to protect the peso.

"Prior to this month, policymakers appeared content to watch their currencies slide, as they altered their focus from fighting inflation to fostering growth. But in the last few weeks, a number of central banks have taken action to prop up their currencies, raising questions about whether the unsuccessful foreign exchange policy of the Bank of Korea will be replicated in other Asian nations," Moody's said.

Moody's said that with the exception of the yen, the outlook for Asian currencies remains bearish.

"The Philippines and Indonesia are both experiencing severe inflation problems, with second round effects having set in. Negative real interest rates and faltering stock markets have led to capital outflows from both nations, with the rupiah and peso having depreciated 5 percent and 2.4 percent, respectively, since July 1," Moody's said.

Moody's added that the unsuccessful performance of the Bank of Korea in attempting to prop up the ailing won demonstrates the futility of currency market intervention.

"Hopefully other central banks in the region will not make the same mistake and lose billions fighting an impossible battle against markets, which hold the upper hand in these matters," Moody's added.

The South Korean central bank has spent at least $18.5 billion in foreign reserves since the beginning of the year, in an unsuccessful attempt to prop up the ailing won, which has fallen 18.1 percent over the same period.