Asian currencies consolidated recent strong gains on Monday, starting the week on a subdued note against the dollar as the US currency made little headway after faltering over the past month. The dollar was marginally higher against a basket of currencies, supported by a rise in US bond yields, but showed no signs of recovering from a three-year low set last week. "At this point, given the strength they (Asian currencies) had last week, we're seeing some consolidation and profit taking today," said Khoon Goh, head of Asia research at ANZ Banking Group.
"US 10-year bond yields are also pushing higher, which is providing some support the dollar, hence the slight retracement in Asian currencies." Goh expects the regional currencies to continue trading sideways ahead of this week's Federal Reserve policy meeting and President Donald Trump's State of the Union address.
Asian currencies have had a largely strong showing so far this year, underpinned by a broadly weaker dollar which has been pressured by its receding yield advantage and worries about the Trump administration's protectionist trade policies.
On the day, the Philippine peso shed nearly 0.4 percent against the dollar. The country is bracing for a possible three-month-long emergency in areas around an erupting volcano, which has already displaced more than 81,000 and caused overcrowding at temporary shelters, the country's disaster agency said on Friday.
Elsewhere, moves were modest. The Indonesian rupiah fell about 0.2 percent against the dollar, while the Thai Baht edged up to a more than four-year high on the greenback. The Thai currency has benefited from the dollar's woes. Thailand's central bank governor said last week that policy makers are concerned that a strong baht might hurt the economy and is ready to consider additional measures if moves in the currency are 'unusual.'
Investors have raised their long positions on most Asian currencies, a Reuters poll showed last week. The Philippine peso saw sentiment reverting to bearish territory from neutral, while bullish bets on the Chinese yuan were raised to their highest since September 2010. Sentiment in the Malaysian ringgit was boosted to the strongest since March 2008 on expectations the country's central bank will raise interest rates.