SINGAPORE: Asian currencies moved in a tight range against a firmer dollar on Wednesday ahead of a slew of economic indicators, the foremost being the outcome of a US Federal Open Market Committee meeting later in the day.
The greenback retained gains against a basket of currencies as traders look to whether the Fed will indicate faster monetary tightening this year, while the first rate increase of 2018 is almost unanimously expected.
A hawkish fed means greater upside potential for the dollar, which would drive capital flows away from emerging currencies.
"The market is cautious ahead the FOMC meeting today evening. However we did see some divergence in regional currencies today, as some rose and some fell," said Qi Gao, FX strategist at Scotiabank.
"Overnight, US stocks did slightly better than yesterday, so sentiment might be a bit better today," Gao added.
The Malaysian ringgit and the South Korean won led declines in Asia.
The Hong Kong dollar hit a 33-year low, falling towards the lower end of the central bank's trading band. However, the Chinese yuan inched up.
In Malaysia, inflation for February came in below forecasts. Easing inflationary pressures have dissuaded the need for monetary tightening in the near term, as Malaysia's economy has enjoyed a spell of strength in recent times.
REGIONAL MONETARY POLICY
Investors are now waiting for central bank meetings in Taiwan, Indonesia, and the Philippines on Thursday for further trading cues.
Taiwan's central bank is expected to leave its policy rate steady for the seventh straight quarter, a Reuters poll showed. The Taiwan dollar was largely flat to the dollar ahead of the meeting.
The Philippine central bank is also likely to leave its benchmark rate steady on optimism the country's annual inflation would ease back to a target range next year.
The Philippine peso, which has taken a large dive lately over lagging fundamentals in the country, rose slightly against the dollar.
The Indonesian rupiah edged down versus the dollar. The country's central bank is expected to keep its benchmark rate unchanged, a Reuters poll showed.
"I think the Bank Indonesia always said it will guide the rupiah in line with the nation's fundamentals, so I think they will maintain their stance, in line with market expectations," Gao from Scotiabank added.
The following table shows rates for Asian currencies against the dollar on Wednesday.
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