Asian currencies were range-bound on Thursday after strong gains in recent sessions, with investors trying to guess the direction of the dollar ahead of a meeting of Group of Seven finance chiefs next week.
Fears of heightened intervention by regional central banks kept some investors sidelined, as central banks in India and the Philippines were spotted trying to rein in their currencies.
The high-yielding Philippine peso hit 44.05 per dollar, a seven-year high, but suspected dollar-buying by the central bank kept it away from the psychologically important 44 level. "The central bank is always there to smooth volatility or prevent the peso from strengthening too much," said a trader in Manila, adding that the 44 level would be tested soon. But a second trader felt that level would hold until next week due to the presence of the central bank and profit-taking.
The Indonesian rupiah, another high-yielder, steadied near 9,080 per dollar, down a fifth of a percent from late Asian trade on Wednesday. The rupiah has gained 3.3 percent since September 18, when the US Federal Reserve cut its benchmark interest rate by hefty 50 basis points and sparked a rally in most Asian currencies.
The peso has risen 4.3 percent versus the dollar since then. Meanwhile, the dollar fell versus the euro amid speculation that the Fed may cut rates again this month. Bank of America strategist Christy Tan said trading in Asian currencies was subdued ahead of public holidays in some Asian countries, and investors were looking to the G7 meeting for comments that could set the tone for the dollar.
"The market focus will be likely to switch to the upcoming G7 meeting next week, where European officials are expected to step up calls for China and Asia to share the burden of global imbalance adjustments," she said.
The Indian rupee, Asia's best performer this year with gains of 12.6 percent, pulled back from its 9-1/2-year high of 39.275 per dollar as the central bank was seen intervening.
Official data showed India's foreign exchange reserves swelled by $18.9 billion in September, highlighting the central bank's efforts to stem rupee gains fuelled by foreign funds. The South Korean won hit a two-week low at 921.30 per dollar on reports Dutch Philips Electronics had sold a stake in LG.Philips LCD. As expected, the central bank held interest rates steady on Thursday.
The Singapore dollar hovered near 1.4640 to the US dollar, off its 10-year peak of 1.4625 hit on Wednesday after the central bank surprised the market by tightening monetary policy slightly.
Many analysts believe Singapore's central bank will tolerate long-term appreciation, but they caution that it could step up intervention in the near term to prevent any sharp rise now. The Malaysian ringgit eased as far as 3.382 per dollar, a day after it rose past 3.38 to a 9-1/2-year high.
"The break below 3.3800 paves the way for testing the key level of 3.3500 last seen on February 11, 1998," said Suresh Ramanathan, a strategist at CIMB Bank. "It's a big gap between 3.3800 and 3.3500, so we could see very choppy trades," he said.