Asian currencies stuck to tight ranges on Thursday, with traders reluctant to move ahead of this session's likely US Federal Reserve interest-rate rise and policy statement that could signal further increases ahead.
The Philippine peso extended this week's falls to a 6-1/2-month low and the South Korean won dipped to its lowest in more than a week, but trade was generally subdued before the US rate decision.
The Fed is widely expected to deliver its 17th consecutive rate rise, lifting its key rate a quarter of a percentage point to 5.25 percent. The policy statement will be scrutinised for clues on what may come next. "Everything is pretty much in a range," said Callum Henderson, head of currency strategy at Standard Chartered.
"There is definitely interest to get back into higher risk assets. But given the hammering that they have taken, no one is prepared to pull the trigger until we see the Fed give some kind of signal."
Sabrina Jacobs, emerging market currency strategist for Asia at Dresdner Kleinwort, said the risks for Asian currencies from the US rate verdict were asymmetric.
"The market is already looking for a hawkish stance following the comments in the last two weeks that were all along these lines," she said.
"If this is confirmed, it's already more or less discounted. On the other hand, if the Fed does not live up to expectations on the hawkishness, this could provide some relief and support emerging market currencies, including Asia."
The Philippine central bank left interest rates steady, as expected, while Taiwan's central bank was expected to lift rates later on Thursday. The Philippine overnight borrowing rate was kept steady at 7.50 percent.
Concerns that the Philippine interest-rate advantage over the United States was narrowing undermined the peso this week. The currency fell to 53.65 per dollar on Thursday, its lowest since mid-December and down from the previous day's local close at about 53.47.
"The market is just covering positions ahead of the Fed interest rate decision," said a trader in Manila. "The 53.65 is a key resistance level for the dollar."
The Taiwan dollar was quoted at about 32.61 per US dollar, up slightly from Wednesday's close and off six-month lows hit earlier this week at about 32.80.
Economists expect Taiwan's central bank to announce a 12.5 basis point rise in its benchmark discount rate to 2.5 percent after the close of local markets.
The South Korean won eased 0.4 percent to about 961 per dollar, its lowest level in more than a week, while the Singapore dollar slipped about a quarter of a percent to 1.6000 per US dollar - close to Monday's two-month low.
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