Most emerging Asian currencies slid on Wednesday due to the dollar's broad strength as more Federal Reserve officials made comments indicating it might not be long before US rates go higher. The Malaysian ringgit bucked regional depreciation, hitting its strongest in more than seven months, on expectations of demand linked to state fund 1Malaysia Development Berhad's (1MDB) sale of its power assets.
South Korea's won led losses among peers as traders took profits from its recent gains. Thailand's baht touched a one-week low before the central bank decision to keep interest rates unchanged. The US dollar ticked up against a basket of six major currencies with the euro weaker after suicide bomb attacks on Brussels airport and a rush-hour metro train in the Belgian capital on Tuesday.
On Monday, two Fed officials made hawkish remarks, and on Tuesday more of them came. Philadelphia Fed President Patrick Harker said late on Tuesday that the central bank should consider another interest rate hike as early as next month if the US economy continues to improve, and said he would prefer at least three hikes before year-end.
Chicago Fed President Charles Evans said he expects two rate increases this year, unless economic data comes in a lot stronger than expected or inflation picks up faster than anticipated. "I see a risk of USD pullback from recent decline in the short term as Fed speaks of late provided speed bumps in contrast to the dovish FOMC," said Christopher Wong, senior FX strategist for Maybank in Singapore.
"Asia ex-Japan FX could retrace some of its recent gains." The ringgit rose as much as 1.3 percent to 3.9550 per dollar, its strongest since August 11. The Malaysian currency found support as state fund 1MDB said it has completed the sale of its power assets to China General Nuclear Corp under a $2.3 billion cash deal agreed last November. "Likely adding to the MYR momentum was the completion of the EDRA Global Energy Bhd sale," said Stephen Innes, a senior trader for FX broker OANDA Asia Pacific in Singapore.
The ringgit pared most of earlier gains, tracking slides in regional peers, as traders booked profits from the best performing Asian currency this year. It has a chart resistance at 3.9666, the 38.2 percent Fibonacci retracement of its depreciation from August 2014 to September 2015, analysts said. The baht slid 0.5 percent to 35.08 per dollar, its weakest since March 16. Some traders had earlier bet the Bank of Thailand would cut the interest rate at a Wednesday meeting, but the central bank left it on hold, letting fiscal measures take the lead to revive the sluggish domestic economy. The decision caused those traders to cover some of bearish bets on the baht. The Thai currency also pared some earlier losses on exporters' demand for month-end settlements.