Asian currencies rose on Thursday after the Federal Reserve held interest rates steady and dampened expectations for an imminent rate rise, but buying interest remained fragile after recent sell-off.
The Fed held interest rates at 2 percent on Wednesday, as widely expected, and signalled it was no rush to raise them, even as it voiced greater concerns about inflation. Reduced prospects of a US rate rise weighed on the dollar and made higher-yielding emerging markets currencies more appealing.
The Philippine peso rose as far as 44.40 per dollar, up about 0.4 percent from Wednesday's close. The Singapore dollar rose as far as 1.3643 per US dollar, up a fifth of a percent from late Asian trade on Wednesday.
A Singapore-based trader said the view that the Fed was in no rush to raise rates prodded investors to buy the Singapore dollar, which is expected to trade between 1.3630 and 1.3720 for the day. The Malaysian ringgit rose to 3.2520 per dollar, up more than 0.3 percent from late Asian trade on Wednesday.
"The risk appetite has picked up - note rallies in stocks, tighter spreads, lower volatility and a generally softer US dollar," said Thio Chin Loo, currency strategist at BNP Paribas. The MSCI index of stocks in the Asia-Pacific region excluding Japan edged up about 0.4 percent.
Still, investors remain cautious after the recent selling of Asian currencies spurred by foreign sales of regional stocks amid inflation worries stoked by record high oil prices, and a broad rise in the dollar.
"Asian currencies are not breaking ranges yet, with oil still weighing and inflation concerns not fading," said Han Sia Yeo, currency strategist at Bank of America.
The Thai baht rose a fifth of a percent to 33.50 per dollar as traders cited dollar-selling intervention by the Bank of Thailand (BoT) to support the local currency. "They sold (dollars) from 33.60 to 33.55," said one Bangkok-based trader.
Central banks in South Korea, Thailand, the Philippines and India have in recent week sold dollars to support their currencies out of fear that their weakness would stoke inflation.
Elsewhere, the Taiwan dollar rose a quarter of a percent to a one-week high at 30.30 per US dollar, as the market expected the central bank to raise interest rates by at least 12.5 basis points in its drawn out campaign to curb inflation. The South Korean won, the region's worst performer, briefly rose to 1,033.9 per dollar.
Westpac strategist Sean Callow suggested investors should go short on the won against the dollar via non-deliverable forwards. "The Taiwan dollar is more resilient, backed by stronger current account position and far less gloomy foreign sentiment over Taiwan stocks than Korean stocks," he said in a note.
The Chinese yuan hit a post-revaluation high at 8.8612 per dollar as policy makers are seen still favouring the steady rise in the currency to help quell inflation. The yuan has gained 6.4 percent so far this year, trailing the Taiwan dollar, which has gained 6.9 percent.
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