Asian currencies moved in tight ranges on Wednesday as mixed signals from the global and US economy, including the dovish tone of minutes from the Federal Reserve, kept most investors on the sidelines. The Malaysian ringgit hit a one-week high and the Philippine peso made modest gains, but other regional currencies barely moved.
"In a nutshell, much of the flows lately has been more due to corporate bargain hunting for US dollars and interbank position play rather than directional flow bets done by speculators and arbitrage traders," said Suresh Ramanathan, a strategist at CIMB Investment Bank.
"That's why we note there has been divergence on daily performance of Asian currencies across different currency pairs, instead of what we saw late last year when all dollar/Asians pairings had a more pronounced directional flow play," he said.
Sluggish Asian trading followed the Fed's forecasts indicating economic contraction in the first half of this year, fanning fears of a deeper US economic slowdown. However, reports that Citigroup Inc was close to a sale of securities to private equity firms briefly lifted the US dollar in overnight trading.
The ringgit rose 0.3 percent to 3.1770 per dollar, strengthening past the 3.18-resistance level it faced in early trading due to selling pressure on the local currency. The peso initially inched up 0.3 percent to 41.65, but later weakened and closed at 41.7250.
"There probably is a two way interest on the dollar/peso which is why it has been trading in a very tight range," a Manila-based trader said. The Singapore dollar and Indonesian rupiah stayed largely unchanged from their previous closing levels, even as local markets fell 1.2 percent and 3 percent respectively.
Singapore's central bank, the Monetary Authority of Singapore (MAS), is due to review its monetary policy on Thursday. Most analysts polled in a Reuters survey expected the relatively tight policy to remain unchanged. "We think growth concerns will be sufficiently pressing to MAS that it leaves its 'modest and gradual' policy unchanged at tomorrow's meeting," an ING research note said.
The Thai baht rebounded from a 5-1/2-week low at 31.87 per dollar hit on Tuesday and rose as high as 31.69. The Bank of Thailand held its benchmark interest rate unchanged at 3.25 percent as expected.
Markets in South Korea were closed on Wednesday for the country's parliamentary elections. The central bank will review its interest rates policy on Thursday, and consensus among economists indicates rates will be held steady at 5.0 percent.
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