A retreat in US debt yields gave Asian currencies some respite on Wednesday, but going forward they are likely to remain under pressure due to the prospect of more rate hikes from the US Federal Reserve.
Benchmark U.S 10-year Treasury yields came off seven-and-a -half-year highs overnight, though investors continue to bet that the Fed will remain on its policy tightening path, despite President Donald Trump criticising the central bank on Tuesday for raising rates too fast.
Investors are focussed on US inflation data due to be released on Thursday. A Reuters poll forecast that data would show inflation sloed to 2.4 percent.
The Thai baht was Asia's best performer, strengthening 0.5 percent to 32.860 per dollar, as analysts reckoned Thai interest rates would soon start increasing again, having not risen since 2011.
The country's central bank meets on Nov.14, and its board members were split when it opted to hold the policy rate steady last month.
"The prospects of the beginning of a rate normalization in Thailand still looks pretty strong to us, given that the output gap has likely closed," said Wei Liang Chang, FX strategist at Mizuho Bank.
Meanwhile, the Philippine peso was unmoved after initially weakening following August trade data that showed a deficit above $3 billion for a fifth month.
The peso has lost nearly 8 percent this year. Taiwan financial markets were closed for a holiday.
CHINESE YUAN
The yuan firmed 0.1 percent against the dollar to 6.916.
A Reuters poll forecast China's onshore yuan would pare some of its recent losses against the dollar over the coming year, as analysts expected risks would fade from both the US-China trade war and the emerging markets sell-off.
Mizugo's Wei Liang believes the People's Bank of China would take a balanced approach, not wanting to stoke capital outflows by letting the currency weaken too much.
Fall out from the trade war prompted the International Monetary Fund (IMF) to lower its China's 2019 economic growth forecast to 6.2 percent from 6.4 percent.
VOLATILE RUPEE
A slip in oil prices helped the rupee, Asia's worst performer this year, firm 0.4 percent to 74.098 against the dollar, having plumbed record lows a day earlier.
The rupee is expected to stay near record lows over the coming year despite expectations that the Reserve Bank of India will raise rates in December and once more in 2019. India is set
to hold a general election by May, though investors will also be watching how Prime Minister Narendra Modi's Hindu nationalist party fares in a series of state polls later this year.
"The rupee will remain fairly weak over the next three to four months," said Wei Liang Chang.
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