Most emerging Asian currencies eased on Tuesday as investors booked profits from gains in the previous session with the US Federal Reserve seen raising interest rates later this year. Thailand's baht extended losses to hit a near one-month low on bond outflows. The Chinese yuan eased as speculation of a US hike boosted dollar demand, although the central bank set its daily guidance rate firmer.
Most regional currencies rose on Monday as disappointing US jobs data caused investors to reduce bets on chances of the Fed tightening in September. Still, the data did not change prospects that the US central bank will increase borrowing costs by year-end. "Missing estimates does not equate to a very bad NFP number, so the chance of a Fed rate hike remains," said Christopher Wong, a senior FX strategist for Maybank in Singapore, referring to the non-farm payroll data on Friday.
Given the expectations, the dollar's downside is limited, Wong said. The baht lost 0.4 percent to 34.83 per dollar, its weakest since August 10. Foreign investors continued to cut Thai government bond holdings, especially short-term notes, on the currency's weakness. Some local banks sold the baht to take profits from its recent gains, while importers bought the dollar for payments, but few were willing to build up large positions given high volatility.
The baht recovered some of its earlier losses as Bangkok shares rebounded. Still, the Thai currency may weaken to 34.90, around its 55-day moving average and the 38.2 percent Fibonacci retracement level of its appreciation since Britons voted in late June to exit the European Union, analysts said. The next target would be 35.00-35.05, they added.