Most Asian currencies traded cautiously on Wednesday ahead the European Central Bank's policy meeting with technicals showing the dollar has been oversold in recent sessions. The ECB will meet on Thursday, and investors remain wary of the outcome after the central bank signalled earlier this month that the days of cheap money may be coming to an end. Some traders who are bullish on the euro, however, worry that policymaker may take a less hawkish approach than they had wagered on
The dollar index, which tracks the greenback against a basket of six major rivals, edged up 0.18 percent to 94.772. It slipped to a 10-month low on Tuesday as the Republicans' failure to push through a stalled US healthcare bill renewed worries about President Donald Trump's ability to puush through his reform agenda Technical indicators such as Relative Strength index (RSI) showed the dollar index is in an oversold region near 30 levels.
"Asian currencies are pretty much in a holding pattern ahead of ECB, BoJ meetings" said Christopher Wong, senior FX strategist for Maybank. "We are not expecting any major policy-change surprises. But if they (ECB) do withdraw stimulus, risk sentiment could be affected and that may weigh on some Asian currencies."
China's yuan weakened against the dollar for the first time in eight days, despite the strongest official fixing in almost nine months as businesses picked up dollars on the cheap following the US currency's recent downturn. The South Korean won was the top gainer for the region, adding to its over 3 percent rally in the last two weeks.
On the more subdued side, the Indian rupee was trading flat on the day. For the month, the rupee gained just about half a percent. "While mounting foreign currency stockpile has slowed the pace of appreciation in the INR, it also provides a buffer to the INR in case of a withdrawal of global liquidity." said a Scotiabank report. The central bank data showed India's foreign exchange reserves stood at $386.38 billion as of July 7, compared with $360.3 billion at the end of last year.
The Philippine peso was down 0.08 percent at 50.82 per dollar, with traders citing strong corporate demand for the dollar. Analysts aren't bullish on peso over the short term after S&P slashed the 2017 GDP growth outlook to 6.4 percent from 6.6 percent. "USD/PHP will likely test the 51 mark in the weeks ahead." said a Scotiabank report. Foreign investors have net sold about $400 million of Philippine equities so far this year. With over a 2 percent decline, the peso is the worst performer among Asian currencies so far this year.
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