Thailand's baht slid on Thursday, undermined by disappointing factory output data while most emerging Asian currencies eased on doubts over the potential for further gains, given April's solid appreciation. The central bank announced measures to curb the baht's strength, even though some traders and analysts saw them as milder than had been than feared.
The Bank of Thailand earlier relaxed curbs on capital outflows, a move to prevent a strong baht from hurting the country's exports. The currency briefly turned firmer to a session high of 32.75 per dollar. The Thai currency later fell again, tracking regional weakness and on data showing factory output in March was worse than expected.
"This is more of a passive measure. These alone won't make any change," said a Thai bank currency trader in Bangkok, asking not to be identified as the trader is not authorised to speak to the press. The baht has held firm so far this year after outpacing all Asian currencies in 2014 when they fell on expectations of US interest rate hikes, a slowing global economy and regional policy easing.
But the strong baht took a toll on the economy, prompting the Bank of Thailand on Wednesday to surprise markets by cutting its key policy rate for a second straight policy meeting. Most emerging Asian currencies fell for the day despite expectations that the US Federal Reserve may not rush to raise interest rates.
The Fed downgraded its view of the US labour market and economy on Wednesday in a policy statement. The US economy grew just 0.2 percent annual rate in the first quarter, data showed, far below economists' expectations for a 1.0 percent growth and a 2.2 percent expansion in the previous three months. The Fed's assessment and sluggish economic data underscored expectations that the central bank may have to wait until at least the third quarter to start hiking interest rates. Low US borrowing costs usually help emerging Asia maintain the appeal of higher yields.
Still, some analysts doubted if emerging Asian currencies could extend gains in the next month as the Fed has not ruled out hiking interest rates in June. Regional currencies have been reflecting a delay in US rate increases to some degree, they added. "I expect the USD to regain some ground against Asian currencies in May, on expectation of an improvement in the US data pulse after a very soft Q1," said Khoon Goh, senior FX strategist for ANZ in Singapore.
"Market pricing is for Fed hike in December. So if the US data picks up, then we might see a shift in expectations." Most emerging Asian currencies were on course for monthly gains, led by the Malaysian ringgit, according to Thomson Reuters data. The ringgit has risen 3.7 percent against the dollar so far April, which would be the largest monthly appreciation since January 2012, the data showed.
Oil prices showed signs of stablisation, easing concerns that sliding crude may hurt the current and fiscal accounts of Malaysia, a net oil exporter. The Singapore dollar has risen 3.6 percent in April, which would be the largest monthly gain since October 2011. The city-state's central bank unexpectedly held off further easing earlier this month. South Korea's won ended the month up 3.5 percent, the largest monthly gain since October 2011, on stock investment inflows. Taiwan's dollar has also risen 2.6 percent so far this month, which would be the biggest monthly appreciation since January 2011.
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