Asian currencies recouped early losses on Friday on renewed speculation China was about to let its currency appreciate for a second time in five weeks just ahead of President Hu Jintao's visit to the United States.
But a Chinese central bank spokesman said the yuan's exchange rate was decided by market forces, so the question of the authority revaluing the currency "does not exist."
The Indonesian rupiah recovered from a 3-1/2-year low in late Asian trade on Friday, after the government resolved to defend the currency by boosting domestic dollar supplies.
Other Asian currencies that are likely to gain from a revaluation of the Chinese currency were boosted by the yuan speculation.
The Thai baht gained 0.3 percent to 41 per dollar and the Singapore dollar and Taiwan dollar recovered all of their losses generated earlier on concern about how costly oil prices would impact the region's economies.
US benchmark crude oil futures traded at $67.20 per barrel, hovering near the record of $68 hit on Thursday.
HSBC, Dresdner and other banks have said speculation of a second yuan revaluation would return ahead of Hu's meeting with US President George W. Bush on September 7.
Analysts have said China risked being branded a currency manipulator by the US Treasury for gaining unfair advantage over US businesses if it did not let the yuan gain further following a 2.1 percent revaluation on July 21. "There's talk that they'll deliver another 1 percent revaluation," said Philip Wee, currency strategist at DBS Bank.
"Some players are trying to blend the move from China into the visit next month," he said, referring to Hu's US visit. The one-month yuan non-deliverable forward contract was quoted at 8.0650 per dollar, compared with 8.0890 quoted late on Thursday.
The yuan's spot rate strengthened as high as 8.0960 per dollar, its strongest level since July 21.
The rupiah traded at about 10,370 per dollar, down 0.4 percent on the previous day, but regaining ground after dropping to a 3-1/2-year low of 10,460 in early Asian trading on Friday.
A spokesman for Indonesian President Susilo Bambang Yudhoyono said the president would meet his cabinet and former central bank chiefs on Friday, adding he was serious about helping the rupiah.
The rupiah has lost about 6 percent this month and 10 percent this year as soaring oil costs worsened the country's balance of payments, while the central bank's reluctance to raise interest rates to dampen inflation worried investors.
Aburizal Bakrie, the country's chief economics minister, said the government aims to speed up disbursement of foreign loans for state projects to increase the domestic supply of dollars.
The central bank has been selling dollars for several weeks but has had no success at stemming the rupiah's decline.
The treasury director general of the finance ministry said the government may convert some dollar holdings at the central bank into rupiah next week if needed to shore up the currency.
"The market is waiting for the outcome of those efforts," said a Jakarta currency dealer. He said the impact of the government statement had so far been minimal.
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