The baht led Asian currencies lower on Monday on short-dollar covering by interbank traders although easing political worries and expectations of a rate increase by the Thai central bank lent some support. Bank of Thailand may raise interest rates on Wednesday, while Bank Indonesia and Bank of Korea, which will also review rates this week, are likely to leave rates unchanged.
The Thai currency, which so far was the region's worst performer in 2011, turned around and was last week's biggest gainer after the result of the general election on July 3 eased worries about the country's political uncertainty. The Thai currency is seen staying firm against the dollar, probably heading to 30.10, the 76.4 percent Fibonacci retracement of its weakening during May and June. The baht is also expected to strengthen against Asian peers, such as the Singapore dollar, the Indonesian rupiah and the won.
The Philippine peso suffered as interbank speculators covered dollar-short positions. Still, the peso is seen finding some support, around 43.00 per dollar, which the central bank allowed the local currency to strengthen past last week, dealers said. The won eased, but it recovered most of earlier losses on demand linked inflows to South Korea's stocks and bonds. The Singapore dollar recouped earlier losses on news that Nestle, offered to buy 60 percent of Chinese candies and pastries group Hsu Fu Chi International for about $1.7 billion, which is listed in Singapore.