SINGAPORE: Asian currencies were steady to lower against the dollar on Tuesday, as investors awaited clues on the US monetary policy outlook from the Federal Reserve's two-day policy meeting starting later in the day.
Emerging Asian currencies have rallied this month as improving US economic data plus a recovery in oil prices that has helped reduce concerns about the outlook for global growth and spurred buying of risk assets.
Analysts, however, say Asian currencies could fall against the dollar in the near term if market expectations for the Fed to raise interest rates in the next few months were to increase.
The Fed's policy-setting Federal Open Market Committee (FOMC) holds a two-day meeting starting on Tuesday and is widely expected to keep interest rates unchanged.
The focus is whether the post-meeting statement and comments by Fed Chair Janet Yellen will lead to any increase in bets for the Fed to raise interest rates by mid-year, following a recent improvement in US economic data.
"The recent rally in Asian currencies was due partly to the market's lower expectations of US Fed rate hikes in the foreseeable future," said Alvin Liew, senior economist at UOB.
"The Fed may issue some hawkish signals to keep the potential rate hike decision alive in the April and June FOMC meetings, which may be enough to send the US dollar higher against Asian currencies later this week," Liew said.
THAI BAHT
The baht held steady versus the dollar, staying near a high of 35.035 set against the dollar on Monday, its strongest level since August 2015.
The baht's recent rise has been accompanied by signs of inflows into Thai assets.
Net foreign buying of Thai bonds totalled 44.5 billion baht between March 1 to March 11, according to data from the Thai Bond Market Association.
INDONESIAN RUPIAH
A key event for the rupiah this week is an interest rate decision by Indonesia's central bank on Thursday.
Analysts are almost evenly split on whether Indonesia's central bank on Thursday will cut its key interest rate for a third time this year, a Reuters poll showed.
Thirteen of 22 analysts in the poll said Bank Indonesia (BI) will trim the benchmark rate by another 25 basis points to 6.75 percent. BI cut the rate by that amount at policy meetings in January and February.
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