Most Asia currencies edged up on Wednesday as the Japanese yen bounced back from this week's four-year low versus the dollar, but caution prevailed ahead of the prospect of fresh policy signals from the Federal Reserve.
A wave of sell-offs in recent weeks fanned the fallout from Thailand's imposition of capital controls last month, and the dollar's resurgence amid signs of solid US economic growth have pushed many Asian currencies into negative territory.
"Market interests are subdued ahead of the Federal Reserve and non-farm payrolls as they lie in wait for external drivers," said Christy Tan, currency strategist at Bank of America.
The US central bank is widely expected to keep interest rates unchanged at 5.25 percent when it concludes its two-day meeting later on Wednesday, so the main focus will be on what the central bank has to say about the outlook for rates.
Analysts and traders will closely watch for any signs of pressure on Japan over the yen's weakness as US Treasury Secretary Henry Paulson testifies before Congress later on Wednesday.
"The testimony will be closely watched, but not for the well repeated stance on the Chinese yuan. Instead, most will be interested to see if US lawmakers will join the Europeans in complaining about the yen weakness," DBS said in a research report.
Europe's worries about the yen's slump to record lows against the euro will be raised by the Group of Seven industrial powers next week, the German finance minister said on Tuesday after a chorus of complaints from his European counterparts.
However, there was no sign of an action plan beyond reiterating their concerns to Tokyo when finance ministers from the G7 countries - the United States, Japan, Germany, Britain, Italy, France and Canada - meet on February 9-10.
The South Korean won rose to around 941 per dollar as investors shrugged off government data showing the country's December current account surplus fell to a five-month low. But analysts believe the falling current account surplus would undermine the already weakening won in the longer term. "In addition, the weakness of yen/won is a major negative for the export competitiveness of Korea," said Callum Henderson, currency strategist at Standard Chartered Bank.
The Singapore dollar gained nearly a fifth of a percent to about 1.536 per US dollar, while the Philippine peso strengthened moderately to about 48.9 per dollar.
The Thai baht, trading in a two-tier market since the government imposed capital controls last month to deter currency speculation, stayed flat onshore near 35.8 per dollar compared with about 34.7 offshore. The Chinese yuan edged up to around 7.7730 per dollar from Tuesday's close of 7.7750, heading for a full-month gain of about 0.4 percent.
The Indian rupee hit a near one-year high after Standard & Poor's raised India's sovereign credit ratings to investment grade, a move analysts saw as helping to draw more capital inflows. The partially convertible rupee was steady at 44.17 per dollar after the Reserve Bank of India raised its repurchase rate by 25 basis points to 7.50 percent but kept its reverse repurchase rate steady at 6 percent.