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Most Asian currencies were little moved on Monday, with a firm tone in the dollar offset by strong gains in regional shares. Upbeat US retail sales and consumer confidence data on Friday strengthened expectations that the US Federal Reserve is unlikely to cut interest rates early next year.
While this boosted dollar sentiment, Asian currencies held their ground as equity markets headed up. Singapore's Straits Times Index hit a record high as expectations of rising property prices boosted firms with exposure to the housing market, Seoul shares rose for a third straight session on stronger-than-expected earnings and Taiwan's key TAIEX share index rose to a five-month high.
The yen, which had shed as much as 0.5 percent versus the dollar, recovered slightly after Russia's central bank said it had started to buy yen for its foreign exchange reserves.
This in turn supported other regional units. "Today has been rangy because the dollar is still supported by the reassessment of the Fed outlook but stocks are providing a reason to sell dollar/Asia," said Westpac currency strategist Sean Callow. "South Korea is an example of risk appetite returning following the bad news on North Korea last week."
The South Korean won was steady close to the 955 per dollar level. The Taiwan dollar changed hands at 33.17 per US dollar, little moved from its close in a rare Saturday trading session, but up about 0.5 percent from Thursday's 10-month low of 33.34.
The Thai baht stuck to a tight range 37.50 to 37.43 per dollar, while the Philippine peso continued to hover around 50 per dollar. Analysts said renewed carry trades, which involve selling low-yielding currencies such as the yen to invest in higher-yielding currencies, also supported some Asian units.
"We have an equity market rally and most equity markets are taking their lead from the strong US consumption data," said Ben Simpfendorfer, a currency strategist at Royal Bank of Scotland. "The carry trade is also back, so in that environment dollar/Asia doesn't have strength to move much." In late trade, the Indonesian rupiah hit a three-week high at about 9,150 per dollar on firm foreign demand.
"It looks like there is an unwinding of long-dollar positions - there are inflows from offshore and not much demand from locals for dollars," said a trader in Jakarta. "The inflows are partly related to buying of stocks in the past few days." Indonesia's key stock index hit a record high on Monday before giving up the gains.
In Bangkok, focus is turning to Wednesday's Bank of Thailand policy meeting - the first since last month's military coup. Deputy central bank governor Tarisa Watanagase is expected to take over as central bank chief after Pridiyathorn Devakula was named last week as Thailand's post-coup finance minister.
"While we think the BOT will keep rates unchanged at this week's policy meeting, we do not rule out a more dovish comment from the central bank this week with rate cuts likely soon," UBS analysts said in a note.

Copyright Reuters, 2006

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