The Thai baht rallied on Wednesday after the Bank of Thailand delivered a larger-than-anticipated rise in interest rates, but most other Asian currencies dipped as sentiment towards the dollar improved.
Dealers said an upbeat service sector survey on Tuesday from the US Institute for Supply Management and a softer tone in the yen were keeping regional currencies on the back foot against the dollar for now.
The South Korean won Taiwan dollar and Indonesian rupiah all slipped against the US dollar, while the Singapore dollar managed to pare early falls by late Asian trade.
The Thai baht was one of the day's best performers, adding as much as a third of a percent from late Asian trading levels on Tuesday to 40.96 per dollar.
It reversed early losses after the Bank of Thailand raised its benchmark 14-day repurchase rate by 50 basis points to 3.25 percent to keep a check on inflation. It was Thailand's seventh rate increase since August 2004.
Traders had bet on a smaller 25 basis points move and the steeper rate increase was expected to bolster the baht.
"Clearly 25 basis points was expected, so the 50 basis point move comes as a surprise to the market," said Callum Henderson, head of currency strategy at Standard Chartered.
"Prior to this move, the Bank of Thailand had adopted a measured tightening policy. It looks like it is serious about curbing inflation and giving some stability to the baht."
Thailand's monetary tightening follows Tuesday's sharp interest-rate hike in Indonesia.
Bank Indonesia lifted its target for key 1-month interest rates by half a percentage point to 10 percent and unveiled other measures to boost the rupiah's appeal.
The second rate rise in a week has lent some support to the rupiah, Asia's worst performing currency this year. The Philippine peso like the baht, went against the regional bias and strengthened against the dollar.
It added about a third of a percent to 56.07 per dollar and traders said developments on the political front were helping to support the peso.
Philippine President Gloria Macapagal Arroyo, who faces allegations of electoral fraud and graft, has survived an impeachment vote in Congress due to a solid majority.
"Political risk is being pared back slightly," said one trader in Manila. "Also dollar/peso has failed to go above 56.30 so there has been some unwinding of long positions."