Asian currencies were mostly weaker against the dollar on Wednesday after Federal Reserve Chairman Alan Greenspan sounded upbeat on the US economy, although stock market gains helped lift the South Korean won.
Greenspan's outlook was positive for the dollar, and analysts said his views were also
supportive of Asian currencies although their initial reaction was to weaken. Stock markets followed the lead of US shares and rallied.
The United States is a key export market for Asia. Stronger US growth should feed
through to the region, which analysts said would make authorities more relaxed about currency gains.
"To the extent that there is more optimism about US growth holding up in the second half, that is a little bit more encouraging for Asian currencies," Royal Bank of Scotland markets strategist David Simmonds said.
"However, they will struggle for traction in an environment where the international dollar rallies," he said. RBS expects the dollar to strengthen to over 110 yen and the euro to fall under $1.20 in coming months.
The Singapore dollar, which has lost momentum after failing to rally through 1.6980 per dollar this week, fell about 0.3 percent to 1.7070 per dollar before finding some support.
Simmonds said while some speculative players had sold the Sing in recent days, those with a view out to one month had been buying Singapore dollars.
The Thai baht weakened to 40.89 per dollar, remaining in the 40.50 to 41.00 per dollar range it has traded for more than two months.
As expected, the Bank of Thailand left its benchmark repurchase rate at a record low of 1.25 percent after a meeting on Wednesday, but said it saw less need for the current "extremely" low rates going forward.
Bank of America said in a note that Thailand's current account surplus meant it could lag the United States in raising rates, but would eventually have to follow to deter capital outflows.
Stock markets around Asia rose on a strong lead from the United States, where technology stocks performed well, and the Korean won and Taiwan dollar were the major beneficiaries amongst Asian currencies.
The Philadelphia Stock Exchange's semiconductor index, which hit an 11-month low on Monday, rebounded 2.5 percent on Tuesday.
Semi-conductors are an important industry for Korea and Taiwan.
The won, the strongest Asian currency this year, ended on the strong side of 1,160 per dollar. Still, the market is not
expected to challenge the 1,150 per dollar level for fear of prompting central bank intervention.
The Taiwan dollar's small fall saw it close local trade at 33.946 per dollar - its lowest close since January 2.
The Indian rupee was lifted off early lows when state-run banks, which usually act on behalf of the central bank, sold dollars, dealers said.
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