Asian currencies surrendered their meagre gains on Wednesday after China quashed rumours of an imminent yuan policy change and Thailand said it will keep the baht competitive for exports. The regional moved less than a quarter of a percent during the day as a lacklustre yen and thinning holiday trade pinned the market down. The yen has marked time in a one yen range around 104.25 per dollar since Monday, robbing Asian currencies of direction.
The Singapore dollar's moves to the firmer side of 1.64 a dollar were short-lived. Fear of intervention by the Monetary Authority of Singapore, coupled with China's statement that it had no plans to revalue the tightly managed yuan before the year-end, dragged the currency down.
The denial also took the steam out of Chinese yuan non-deliverable forwards.
One-year NDFs were quoted at 4,700 points, down 100 points from the day's peak, which had priced in a 6.2 percent appreciation in the yuan in a year.
"This is a market rumour," a central bank spokesman said when asked about the speculation in offshore currency markets.
"At present there is no change in the exchange rate policy."
The yuan premium had risen this week as traders positioned themselves for a possible change in the yuan's virtually fixed rate around 8.28 per dollar.
"The market was trying to second-guess the Chinese authorities," said Bhanu Baweja of UBS in Singapore. He saw no reason to expect a one-off yuan revaluation or, indeed, any move at all before the end of the year or in early 2005.
"A big revaluation, in terms of market thinking, is driven by political pressure, severe yuan under-valuation and the need to slow down the economy by massive revaluation.
"I don't think they are going to move for any of these reasons. They will move for a structural reason and that will be a modest move," Baweja said.
Elsewhere, the baht stayed in a tight range just a shade weaker than 39 per dollar.
Bank of Thailand Governor Pridiyathorn Devakula said the central bank would try to keep the baht at a level that is competitive for exporters.
The South Korean won was also hemmed in a narrow range of 1,053-1,058 per dollar, with little incentive to break out after a steep 9 percent rally since October that has made it Asia's top performer so far in 2004.
Wariness over intervention capped the Taiwan dollar forcing it to retreat from a 2-week high of 32.22 a dollar even as the stock market extended its rally since the start of the month.
Expectations of heavier inflow of dollars from Filipinos working overseas propped up the Philippine peso despite the threat of sovereign ratings downgrade as lawmakers struggle to rein in a bulging budget deficit.
The Indonesian rupiah showed almost no reaction to a ratings upgrade by Standard & Poor's.
S&P lifted the country's foreign currency rating by a notch to B-plus, citing progress in macroeconomic stability and fiscal management as well as declining debt and favourable external liquidity.
The rupiah was steady around 9,325 a dollar, maintaining its weak bias as markets priced in security and political fears.
Indonesian Vice-President Jusuf Kalla's weekend victory in the contest to lead Golkar, the biggest opposition party, is widely seen as a bonus for President Susilo Bambang Yudhoyono.
Yet some analysts are concerned Kalla's larger backing could be a threat in the event of disagreements over policy in Indonesia's fragmented cabinet.
The rupiah has also been hurt by security alerts.
This week, an old grenade was found in the compound of the Hilton hotel in Jakarta, just days after warnings that militants might attack one of the country's three Hilton hotels.
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