Most Asian currencies edged higher on Wednesday, shrugging off another round of tit-for-tat exchanges in the US-China trade war, while suspected central bank intervention supported the rupee. The Chinese yuan allayed initial weakness at the open to strengthen 0.1 percent to 6.852 per dollar as Premier Li Keqiang assured markets China would not devalue the currency to boost exports.
"It is a shot in the arm for yuan bulls," said Wei Liang Chang, FX strategist at Mizuho Bank. This week saw China and the United States plunge deeper into a trade war, as Washington planned to levy new tariffs of 10 percent on $200 billion of Chinese products next week, to which with China responded with tariffs on about $60 billion worth of US goods, as previously planned, but at a lower tariff rate.
Indonesia's rupiah weakened 0.2 percent to 14,885 to the dollar, on mixed messages from the government and central bank on whether exporters will be required to keep earnings onshore and convert them to the local currency.
"Mandating export conversion and retention of earnings onshore may be effective in stabilising the rupiah once they have taken effect," Mizuho's Chang said.
"However, foreign investors might also question whether other capital flow measures may be forthcoming if volatility picks up again."
The Philippine peso fell 0.1 percent against the dollar to 54.07, even though the central bank has signalled a fourth rate hike this year, which could come as soon as its September 27 Monetary Board meeting.
The Philippines has been hit by rising costs, with annual inflation hitting 6.4 percent in August, prompting Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla to declare bringing inflation back to the 2-4 percent target range his most urgent task.
"Escalating inflation has deepened concerns of whether overheating will persist. This suggest that the current account deficit may still widen, if BSP rate hikes are viewed to be behind the curve," Mizuho's Chang added.
Malaysia's ringgit was little changed at 4.142 to the dollar after news that inflation rose 0.2 percent in August, the slowest in 3-1/2 years and below the 0.4 percent median forecast in a Reuters poll.
Inflation has been mild since the new Mahathir government scrapped a goods and services tax in June. The baht was a shade firmer at 32.55 per dollar, hours ahead of a key policy meeting where the central bank is widely expecting to hold rates, although expectations of a rate hike before year-end have surfaced.
Both DBS and OCBC banks expect no change in rates, though OCBC expects the Bank of Thailand to hike once by year-end as inflation edges closer to the mid-point of its 1-4 percent target. "Unlike some of its emerging market peers, Thailand is not under pressure to raise rates to stabilise its exchange rate," DBS Bank said in a note.
The rupee strengthened 0.5 percent to 72.595 as traders suspected central bank dollar selling after it hit yet another record low on Tuesday. The currency has fallen 12 percent so far this year and is the region's worst performer, prompting investors to wager that the central bank will need to raise rates at least twice more this year to shore up the battered rupee.