Asian currencies edged higher on Thursday, with the Taiwan dollar and Thai baht leading the rise, as foreign investors returned to some regional stock markets on expectations of a recovery in growth.
The Indonesian rupiah bucked the trend, dropping to a four-week low as investors worried that protests in Jakarta against the government's proposed increase in fuel prices could snowball into wider political unrest. But intervention by the central bank helped cut losses by the end of Asian trading.
Foreigners bought net T$1.9 billion ($58 million) of Taiwan stocks, the largest net investments in almost three weeks, helping push the Taiwan dollar back from a 10-1/2-month low hit on Wednesday. The currency ended local trading 0.2 percent higher at 33.22 per dollar.
Taiwan's index of leading indicators, which leads economic growth by about a quarter, showed this week a higher-than-expected 0.9 percent rise on the back of improvement in the island's export-oriented manufacturing industry.
"Selling fatigue in the Taiwan dollar is potentially setting in, just as improving Taiwan data questions recent over pessimism of (the) economy's under-performance relative to its peers," DBS Bank currency strategist Philip Wee said in a report.
The Taiwan dollar had plunged to an eight-year low against the South Korean won a week ago after a top central bank official said the currency was too strong compared with regional rivals, given the island's worsening trade performance.
The Singapore dollar also recovered from a 2-1/2-month low hit on Wednesday as traders bet the Monetary Authority of Singapore would maintain its gradually tightening bias for the currency at a review in October.
Data in the past couple of weeks showed buoyant manufacturing growth and rising consumer prices. The Thai baht gained as much as a fifth of a percent to 41.09 per dollar.
Wee at DBS Bank said in the note that the Singapore dollar and Thai baht could outperform against the euro and the Japanese yen because of tightening monetary policies by the respective central banks.
The Bank of Thailand has been Asia's most hawkish central bank, having raised its key rate seven times since August 2004 to a seven-year high of 3.25 percent. After its latest rise this month, the bank warned of further rate increases.
The rupiah failed to capitalise on the buoyant mood in the region. The currency dropped in early trading to 10,450 per dollar, its lowest level since September 1.
Traders said the central bank intervened at about 10,440-10,445 levels. The rupiah had recovered most of its losses to trade at 10,340.
President Susilo Bambang Yudhoyono has promised to cut the government's fuel subsidies and raise prices on October 1 in a bid to curb Indonesia's growing fuel import bill. That sparked street protests in Jakarta and other Indonesian cities on Thursday.
But the protests have not been as violent as many had feared. "The rupiah came back because players were unloading their longs (dollar purchases) after they found no street violence," said a Jakarta currency dealer.
Worries that high fuel import costs could worsen the country's balance of payments led to a sell-off in the rupiah in August. It hit a four-year low of 11,750 per dollar on August 30 before the government said it would raise fuel prices.
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