Asian currencies were largely steady on Thursday, underpinned by a strong recovery in the yen on reports that European officials may complain about yen weakness at a Group of Seven (G7) meeting in February.
The Philippine peso was in focus before an interest rate decision, with comments earlier this week from the central bank governor dampening expectations for a rate reduction.
Gains in some regional currencies, such as the Singapore dollar South Korean won and Malaysian ringgit were limited by wariness that authorities would or had stepped into the market to cap currency gains. Westpac Bank analysts said the market was wary of central bank intervention on the Singapore dollar around the 1.5350 per US dollar area. In Seoul, the won ended the day around 936 per dollar after what dealers called "smoothing operations" by the authorities.
South Korean Finance Minister Kwon O-kyu warned on Thursday against excessive dollar/won forward sales by local exporters, which the government has blamed for the won's sharp rise versus the dollar and yen.
"It is interesting to see how central banks in Asia are managing liquidity and encouraging outflows," said Mirza Baig, a currency strategist at Deutsche Bank.
"That does take pressure off central banks to intervene." South Korea said last week it planned to encourage local companies to invest abroad by giving them tax breaks the latest in a series of efforts to take pressure off the won. The fortunes of the yen meanwhile, remained in focus.
Yen carry trades, where investors have sold the low-yielding yen to invest in higher yielding currencies, helped push the yen to a four-year low versus the dollar earlier this week.
But on Wednesday a short-covering rally that continued after reports about next month's G7 meeting won the yen a reprieve. It traded around 120.40 per dollar, up 0.4 percent from late Wednesday levels.
The peso was little moved at about 48.90 per dollar, with attention fixed on this session's central bank rate decision. Expectations that interest rates would be lowered this week were dampened on Monday when Governor Amando Tetangco suggested that a rate cut was not a done deal.
His deputy said on Wednesday that rates could be held steady and a tiering system for overnight rates maintained, but that the central bank's board would make the final decision. "Markets are largely expecting no change but will look at the rhetoric from the monetary policy board," a Manila trader said.
Elsewhere, the Thai baht edged higher and was quoted at about 35.75 per dollar in the onshore market, compared with about 35.95 on Wednesday. A trader in Bangkok said dollar selling by exporters had pushed the baht up in thin volumes.
Since the central bank unveiled capital controls in December, there has essentially been a two-tier market in the baht, with an offshore and an onshore aspect.
Analysts said reports this week that Thailand could take measures to improve trading liquidity in the offshore market and investor-friendly comments from officials have helped sentiment. "In the last few days the government and central bank have sounded more investor friendly," said OCBC currency strategist Emmanuel Ng. "As long as the capital controls remain, a two-tier market will persist."
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