BENGALURU: Most Asian currencies weakened on Tuesday with Taiwan’s dollar retreating from three-year highs after six straight days of gains, with markets speculating that Taipei might permit currency strengthening to gain leverage in US trade talks.
The Taiwan dollar reversed early gains to trade 0.3% lower at 30.24 per dollar as of 0638 GMT. On Monday, the currency saw its largest single-day percentage gain since the 1980s, closing at 30.145, its strongest finish in over two years.
“The central bank has probably stepped in,” a Taiwan forex trader said, noting Tuesday morning’s move.
Taiwan’s central bank dismissed rumours of US pressure for a stronger currency, attributing recent volatility to foreign inflows and market expectations. The moves occurred alongside US-Taiwan trade talks in Washington.
The scale of the rally suggests a big unwinding as exporters and insurers reconsider long-held dollar positions built during years of trade surpluses.
Thailand’s baht strengthened 0.4% after inflation turned negative for the first time in more than a year in April. The central bank cut rates last week and Deputy Governor Piti Disyatat told Reuters they were ready to ease further if needed.
The next policy meeting is on June 25.
“THB could face the same fate as TWD but impacts could be less severe as investors likely reduced unhedged offshore investments,” said Poon Panichpibool, Krung Thai Bank strategist.
Philippine inflation also cooled, hitting a five-year low in April. The country releases first-quarter growth figures on Thursday, ahead of the June 19 policy meeting.
The Malaysian ringgit fell as much as 1% to 4.238 per dollar.
Malaysia’s central bank is expected to maintain rates on Thursday with the trade minister stating that trade tensions would impact Malaysian exports more significantly than currency fluctuations.
The Indonesian rupiah and the Singaporean dollar each slipped 0.2%.
The dollar index held at 99.82 following a 0.7% two-day decline and a 4.3% drop in April as concerns mounted over Trump’s tariff policies.
The Federal Reserve announces its policy decision on Wednesday, likely holding rates steady.
The MSCI emerging market currencies index advanced 1.75% in April and is poised for its fifth consecutive monthly gain in May.
Dollar weakness is triggering behavior changes among Asian investors trying to hedge downside risk, said Carlos Casanova, senior Asia economist at UBP.
Regional equities were mixed, with Malaysia and Thailand down 0.3% and 0.2%, while Jakarta and the Philippines rose 1.1% and 0.9%, respectively.
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