The Thai baht surged to its highest in well over two years while some other Asian currencies trudged lower against the dollar as investors awaited the minutes of the US Federal Reserve's December policy meeting. The dollar recovered slightly after hitting a 3-1/2 month low against a basket of currencies on Tuesday.
The Fed minutes, due later in the day, are expected to shed some light on its fiscal policies for 2018, and could potentially renew interest in the greenback. "The greenback's ability to claw back losses depends on tonight's FOMC minutes playing down the prospect of a pause in Fed hikes in March," DBS said in a research note. "The risk remains for incoming Fed Chair Jerome Powell to show policy continuity after Janet Yellen's term expires in February."
A revived dollar could cause capital outflows from emerging markets. The South Korean won on Wednesday shed as much as 0.6 percent against the dollar, its biggest intraday drop in nearly one month.
In 2017, the won was the best performer among emerging Asian currencies, gaining about 12.8 percent during its best year since 2004. The Indonesian rupiah was the worst performer in 2017, losing about 0.7 percent against the dollar. The Singapore dollar, which gained the past five days, on Wednesday fell slightly against the dollar. The currency hit a more than 2-1/2 year high on Tuesday.
The Chinese yuan also inched lower against the dollar after three straight sessions of gains. The yuan fell despite China's central bank lifting its official yuan midpoint to the highest level in over 1-1/2 years. The baht was the biggest percentage gainer among Asian currencies on Wednesday, rising as much as 0.5 percent against the dollar.
Thailand's headline consumer prices rose in December but by less below forecast, data showed on Wednesday. Marginal inflation in the country would allow policymakers to keep interest rates low. ANZ said the 1.50 percent key interest rate is "sufficiently supportive for growth to deepen further".
Thai stocks hit a 24-year high following the release of the December inflation data. The baht gained nearly 10 percent against the dollar in 2017, marking its best year since 2010.