Most Asian currencies pared early gains on Wednesday amid persistent concerns about the health of the US economy, even as analysts remained optimistic about their longer-term gains. The Indian rupee retreated to 39.58 per dollar, a 10th of a percent weaker than Tuesday's close, after briefly hitting 39.455 amid hopes of rising capital flows.
The Indonesian rupiah fell to near 9,420 to the dollar, down a quarter of a percent from late Asian trade on Tuesday, after rising as far as 9,370 in early trade. The Singapore dollar pulled back to near 1.46 per US dollar after rising as high as 1.4564 in early trade. But the Philippine peso stayed firm, rising as far as 41.68 per dollar, up 0.7 percent from Tuesday's close and recovering from earlier losses, which amounted to almost 2 percent in the past two sessions.
A trader in Manila said sentiment remained cautious amid persistent jitters about credit market turmoil. "Some investors are entering peso positions but they are not aggressively selling the dollar," said the trader. MSCI's measure of Asia Pacific stocks excluding Japan edged up 0.7 percent, a day after it slid 3.5 percent.
"It seems risk appetite's coming back a bit - US equities were up overnight with positive follow through to Asia equities," said Yen Ping Ho, currency strategist at J.P. Morgan. "This is likely reflecting interests to get back long Asia FX following the position unwinds seen in recent sessions," he said.
Trading was slow ahead of the year-end holiday season. Analysts remain optimistic about the underlying strength of Asian currencies, banking on Asia's relatively robust economic growth and signs of rising inflation that could prod central banks to tolerate faster currency appreciation.
Weaker global demand is likely to take a toll on Asia's exports next year, but buoyant domestic consumption will help the region avoid a substantial economic slowdown, according to a Reuters quarterly report.
"Regional currencies may still see an inherent bias to strengthen against the dollar medium term although we expect more subdued ranges in the last few sessions of the year," said Emmanuel Ng, currency strategist at OCBC Bank. The dollar was steady versus major currencies on Wednesday after last week's strong US inflation data dampened hopes for deep Fed interest rate cuts.
On Tuesday, the European Central Bank and Bank of England poured funds into money markets in a co-ordinated move with other major central banks to inject liquidity to ease the US subprime credit crunch.
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