Most Asian currencies weakened on Thursday as the dollar recovered, with investors now awaiting clarity on further monetary easing measures and uncertainty around coronavirus to reduce before taking on riskier bets.
Upbeat jobs data and the resurgence of Joe Biden as the potential Democratic nominee for US Presidential elections offered support to the dollar overnight, although gains were capped as markets still priced in further monetary easing.
The epidemic is still firmly on the minds of policymakers and investors, with yields on the benchmark US 10-year Treasury slightly above 1%. The Bank of Canada delivered its biggest rate cut in over a decade.
"I think we have to wait for a more sustained recovery in the overall risk sentiment before we see an influx of inflows," said Frances Cheung, head of emerging Asia currency and rates strategy at Westpac.
She highlighted interest differentials are looking favourable for local currencies, although overall risk sentiment needs to improve before it becomes a major factor.
Indonesia's rupiah weakened 0.4% after firming as much as 1.2% in the previous session.
Volatility is a key factor for the rupiah, and it would need to settle down before investment flows back into bonds on a sustained basis, Cheung added.
Officials in the country have been trying to reassure markets after Southeast Asia's biggest economy saw heavy outflows last week. The central bank on Wednesday said it has "many instruments" that it can use to prop up growth.
"We are cautious of the possibility of Covid-19 (coronavirus) contagion accelerating in Indonesia and its impact on sentiments," Maybank analyst wrote in a note.
A Reuters poll found investors turning bearish on the rupiah for the first time since late-October.
The Thai Baht dropped 0.4%. Data showed the country's inflation slowed in February, falling below Bank of Thailand's target range and missing forecasts. Considering the data, ANZ sees a higher chance of a rate cut.
Inflation also slowed in the Philippines for the first time in four months in February. The peso was trading flat.
ING said in a note it expects Bangko Sentral ng Pilipinas (BSP) to continue to ease monetary policy in the near term, considering the global growth risks posed by the virus outbreak.
The BSP will hold its next policy review on March 19.
In China, the yuan weakened 0.2% after surging in the previous session. The Reuters positioning poll showed investors reduced their bearish bets on the yuan to their lowest since early-January last year.
Meanwhile, the South Korean won and the Taiwanese dollar advanced 0.2% and 0.3%, respectively.
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