Most Asian currencies fell modestly on Thursday as the dollar retained gains made after the US Federal Reserve's hawkish policy statement. At the end of its two-day meeting, the Fed kept its benchmark interest rate steady, as expected, but downplayed weak first-quarter economic growth and emphasised the strength of the labour market, a sign it was still on track for two more rate increases this year.
The central bank also said consumer spending continued to be solid, business investment had firmed and inflation has been "running close" to the Fed's target. "The Federal Open Market Committee did not give any explicit cues on what they are likely to do next but the statement that accompanied the decision (to stand pat) was clearly confident of the US growth trajectory and its economic fundamentals," Maybank said in a note.
The dollar index, which tracks the greenback against a basket of trade-weighted peers, climbed 0.1 percent, building on Wednesday's 0.2 percent jump. Sentiment across Asian currencies was also affected by a survey showing growth in China's services sector had cooled to its slowest in almost a year in April as fears of slower economic growth dented business confidence. The yen fell 0.1 percent against the dollar to its weakest level in more than six weeks.
Among other currencies, the Indonesia rupiah slipped marginally after two days of gains. On Wednesday, an Indonesian cabinet minister said the government will delay all planned price increases until after the Muslim festival of Eid al-Fitr this year, to help control inflation. The country's annual inflation rose to a 13-month high in April, mainly due to increasing electricity tariffs, the statistics bureau said on Tuesday. The Malaysian ringgit edged lower on Thursday after six straight days of gains against the dollar.
Economists surveyed by Reuters forecast Malaysia's exports in March would grow 19.2 percent from a year earlier, down from 26.5 percent growth in February. Sentiment was also dented by the lapse of a deal by a former unit of troubled state fund 1Malaysia Development Berhad (1MDB) to sell its stake in a project to a consortium including China's state-owned China Railway Engineering Corp. "This (lapse of the deal) raises doubts whether 1MDB would be able to continue with its deleveraging plans, and could be perceived negatively by ringgit investors," Mizuho said in a note.
The Chinese yuan inched up against the dollar on Thursday after the country's forex regulator said China will step up its crackdown on illegal foreign exchange deals this year. The State Administration of Foreign Exchange (SAFE) said in it would "strengthen authenticity and compliance checks on trade and investment, intensify checks and punishment of illegal foreign exchange activities".
The yuan has stabilised this year, due to curbs on capital outflows and a reversal of the dollar rally, following a fall of 6.5 percent in 2016. Still, the currency is expected to weaken over the coming year, a Reuters poll found, with the dollar supported by US interest rate hikes. The Philippine peso gained 0.2 percent against the dollar on Thursday, bucking the trend across most Asian currencies.
The currency tracked strength in local equities, which rose to a more than seven-month high, driven by gains in the mining sector. Philippine mining stocks rallied after lawmakers ended a 10-month crusade by Environment Secretary Regina Lopez on Wednesday, forcing out the environmentalist whose mining crackdown was backed by the president but led to demands for her removal by miners. Lopez had ordered the closure of more than half of the mines in the world's top nickel ore supplier and last week banned open-pit mining.