Most emerging Asian currencies firmed on Tuesday as conciliatory comments from the United States and China reduced investor anxiety over the escalating tariff war between the world's two biggest economies. The Chinese yuan was largely unchanged at 6.878 a dollar, following a 0.9% decline on Monday.
Market sentiment was buoyed after US President Donald Trump said he feels trade talks between Beijing and Washington are "going to be very successful", while China's top diplomat said the two nations have the "ability and wisdom" to reach a deal.
The comments came the day after China said it would impose higher tariffs on most US imports on a revised $60 billion target list, in retaliation for the tariff hike on $200 billion worth of Chinese goods that went into effect from last Friday.
Investors are latching on to any twist and turn in the trade war negotiations, said Wei Liang Chang, FX strategist at Mizuho Bank, adding that there is less negativity in the markets now after the expected Chinese retaliation was announced.
Leading gains in the region, the Thai baht firmed 0.7%, hitting its strongest level in more than two months.
The currency, the best performer in the region this year, has had some insulation from the trade dispute due to Thailand's large current account surplus.
Thailand's central bank said on Monday it has not intervened in trading of the baht to gain a trade advantage with the United States.
This is positive. Chang said, as it means the authorities would not be restraining gains by the baht unnecessarily.
The Indian rupee gained 0.1% to 70.44 a dollar.
Government data late on Monday showed India's retail inflation rate hit a six-month high in April but remained below the central bank's target for the ninth month.
The Philippine peso and the Singapore dollar firmed against the greenback, and the South Korean won was little changed.
Indonesia's rupiah weakened as much as 0.3% to 14,450 per dollar ahead of April trade figures on Wednesday and Bank Indonesia's interest rate decision on Thursday.
The country is expected to record its first trade deficit in three months in April, according to a Reuters poll, with exports and imports predicted to continue their plunge.
The central bank is expected to keep the benchmark rate at 6% as Sino-US trade tensions have put pressure on the rupiah.