Most Asian currencies rose on Thursday after the Federal Reserve's expected rate cut further eroded the dollar's yield appeal, while investors awaited new data on the US economy and further policy easing. The high-yielding Indonesian rupiah rose as far as 9,065 per dollar, up almost 0.4 percent from late Asian trade on Wednesday to a three-week high.
"The dollar was sold down in non-deliverable forwards (NDFs) overnight after the Fed rate cut," said a trader in Jakarta. The Malaysian ringgit rose to 3.3292 per dollar, up almost a quarter of a percent from late Asian trade on Wednesday.
The Fed cut its key interest rate by a quarter-point to 4.5 percent on Wednesday, which followed a hefty half-point cut on September 18, but sought to temper expectations for further cuts by saying that inflation risks were equal to risks to growth. The Fed's comments prompted analysts to push back expectations for when another US rate cut could come.
In a Reuters poll after the decision, most economists at primary bond dealers said the Fed would keep rates on hold at its next meetings in December and January. The fed funds rate of 4.5 percent compares with central bank rates of 8.25 percent in Indonesia, 3.25 percent in Thailand and 3.5 percent in Malaysia.
Most analysts remain bullish about the near-term prospects for most Asian currencies, even though they have already rallied since the Fed's rate cut in September.
"The odds are that the Fed will have to ease again by another 25 basis points at their next meeting in December and most certainly over the next 9 months," said Thio Chin Loo, currency strategist at BNP Paribas. "That will be bullish for Asia FX whilst the dollar falls off a cliff," she said.
The optimism was echoed by Lehman Brothers analyst Craig Chan: "We still remain data-focused - if the (favourable) global backdrop begins to fade off, it could spark a bit of profit-taking in the market, but overall I'm pretty constructive."
Investors built heavy long positions in the Singapore dollar, the ringgit and South Korean won in the past two weeks as the US dollar's broad weakness made investors pick low-risk Asian assets, according to a Reuters poll.
The Singapore dollar was little changed near 1.448 to the US dollar, while the won fell to the weaker side of 900 per dollar, amid officials warning against currency speculation. South Korea's foreign exchange authorities were suspected of buying more than $2 billion earlier this week in an effort to limit gains in the won, according to dealers.
The Thai baht hit 33.90 per dollar, a day after it rose past the 34-per-dollar level for the first time since early August, but was checked by suspected central bank intervention. "I think the Bank of Thailand is trying to prevent the dollar from falling below the 33.90 support level," said a trader in Bangkok. "Otherwise, the dollar will fall to 33.80 immediately."
The Hong Kong government said on Thursday that it had no plan to re-peg the Hong Kong dollar or widen its trading band against the US dollar, despite rising capital inflows putting pressure on it to defend the peg through intervention.
The Hong Kong dollar fell to a two-week low at 7.7558 per US dollar, within the 7.75-7.85 band, after the central bank intervened heavily on Wednesday to curb its rises. Philippine markets are closed on Thursday and Friday for public holidays.