SINGAPORE: Emerging Asian currencies were mixed on Wednesday as sentiment towards regional units stayed bearish on rising expectations of a US interest rate hike in a month's time.
The recent rout in global bond markets and the dollar rally took more of a back seat.
The Chinese yuan once again hit an eight-year low as the central bank set a weaker daily guidance rate.
Malaysia's ringgit touched a 10-month trough on hedging-related dollar demand among foreign investors as the central bank asked foreign banks to refrain from trading non-deliverable forwards.
By contrast, the South Korean won gained as a foreign exchange official said Seoul was bracing for tougher scrutiny of its currency management from the US Treasury Department under a Trump administration.
The Taiwan dollar advanced as local shares rose and foreign banks cut holdings in US dollars.
The greenback stepped back against a basket of six major currencies, while long-term US Treasury yields eased slightly.
Still, the retreat is unlikely to last long as stronger-than-expected US October retail sales data reinforced the outlook for a Federal Reserve interest rate hike in December.
"Some fatigue is seen setting in, given the huge run-up in the dollar and steepening of the UST curve in the recent week," said Christopher Wong, a senior FX strategist for Maybank in Singapore, referring to US Treasury yields.
"Inflation could come faster than expected, and this could potentially lead to greater impetus for the Fed to raise rates."
RINGGIT
The ringgit fell 0.3 percent to 4.3490 per dollar, its weakest since Jan. 22, in thin trading.
The Malaysian currency failed to draw support although most government bond prices rose.
Malaysia's central bank has asked foreign banks to refrain from trading in the offshore non-deliverable forwards market in the ringgit, according to a letter sent to banks and seen by Reuters.
WON
The won rose earlier as much as 0.5 percent against the dollar, briefly leading gains among emerging Asian currencies.
Earlier, a South Korean foreign exchange official said the country is working to avoid being labelled a currency manipulator, which could undermine its trading status.
The comments spurred speculation that South Korea could may face difficulties stemming the won's appreciation to favour exports in the future, given Trump's protectionist trade policy stance, analysts said.
"The authorities may be reluctant to buy dollars for intervention, although their recent dollar-selling intervention gave some room," said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures in Seoul.
South Korea's foreign exchange authorities have recently intervened recently to limit the won's downside, traders said. The authorities often step in the market to curb its strength when it sharply appreciates, according to traders, and have intervened to limit the won's downside. The authorities often step into the market to curb the won's strength when it appreciates sharply.
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