Asian currencies rebounded against a broadly weaker US dollar on Thursday, while the South Korean won gained as much as 2 percent as the authorities were seen selling dollars to support the local unit. The won rose as far as 1124.8 per dollar from Wednesday's domestic close of 1148.5 - halting losses sparked by investor fears of huge capital flight, as dealers spotted dollar selling by the authorities.
The Malaysian ringgit gained up to 0.3 percent from late Asian trade on Wednesday to 3.425 per dollar. "The dollar/ringgit follow dollar/majors where the dollar showed some weakness," said Kuala Lumpur-based trader. The dollar pulled back from an eight-month high against the euro hit the previous day as investors trimmed positions ahead of an interest rate decision by the European Central Bank.
The Thai baht opened strong at 34.31 per dollar amid speculation that Prime Minister Samak Sundaravej may step down, but it pulled back to 34.45 after Samak rejected calls for his resignation.
Speaking on national radio, Samak said he would not call a snap election to defuse the protests, which turned violent this week, prompting him to declare a state of emergency. "Dollar/baht dropped on speculation that Thai Prime Minister would resign before climbing up due to the rumour was denied," said a trader in Bangkok.
But many analysts believe the country's political turmoil would drag on even if the Primer Minister quits. "I don't think him stepping down will actually achieve much except maybe causing the trouble in the short run," said Magnus Prim, chief Asian currency strategist at SEB in Singapore. Some traders suspected the Bank of Thailand was again selling dollars in the market to support the local unit.
Meanwhile, the Singapore dollar briefly hit 1.4266 per US dollar, up almost 0.8 percent. Easing inflation and slowing economic growth in Singapore have lifted expectations that the Monetary Authority of Singapore (MAS) could relax monetary policy when it meets next month, but many analysts still expect the bank to keep the status quo.
"The pressure to ease has intensified but as the MAS surprised many in the market by tightening at the last meeting, and with inflationary pressures still present, we think the authorities are likely to keep the current policy stance intact at the October meeting," analysts at Goldman Sach said in a note.
The MAS, which steers monetary policy by managing the currency within a undisclosed trading band against a basket of currencies, moved the band up in April to help fight inflation. Elsewhere, the Indonesian rupiah rose to 9,199 per dollar, its highest level since August 11, as the central bank raised its key interest rate by 25 basis points to 9.25 percent in an expected move to tackle the country's still high inflation.
HSBC economist Robert Prior-Wandesforde expected Indonesia's interest rates to rise to 9.75 percent by the end of this year, with a risk of 10 percent, and may continue to rise in 2009. The Taiwan dollar shook off a four-session losing streak to rebound on Thursday due to a gaining Korean won and wariness over central bank intervention, but heavy losses in local stocks limited the gain.
The Taiwan dollar sometimes tracks the South Korean won as both economies have similar trade profiles since they rely mainly on exports for economic growth. The Taiwan dollar traded off a 6-1/2-month low to strengthen to as high as T$31.731 to the USD shortly after the open, but erased some of its gains during the session to close at T$31.761.
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