Asian currencies were mostly steady or slightly lower versus the dollar on Thursday, with the focus on whether US retail sales data will add to expectations for US interest rates to rise later this year. The South Korean won eased earlier on Thursday as the Bank of Korea cut interest rates to offset the potentially harmful economic effects from an outbreak of Middle East Respiratory Syndrome (MERS).
The won, however, later trimmed its losses as position squaring kicked in, after comments by Bank of Korea Governor Lee Ju-yeol were regarded as being not very dovish. The won closed local trade at 1108.8, down slightly on the day. The Singapore dollar and the Philippine peso both easing about 0.2 percent. US retail sales data due later on Thursday will be closely watched, said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore. "I hear that there is a quite a lot of focus on this and whether it will cause sentiment to worsen again," he said, adding that Asian currencies could falter if the data comes in strong and triggers a rise in US bond yields.
The US 10-year Treasury yield had risen to 2.495 percent on Wednesday, the highest level since October. The US 10-year yield last stood at 2.484 percent. Rises in US bond yields can bolster the dollar's appeal and weigh on emerging market currencies. Dollar-buying in non-deliverable forwards helped drag the peso lower, with local players later following suit. The baht held steady at 33.67 to the dollar. On Wednesday, Thailand's central bank left its benchmark interest rate steady after two surprise cuts, saying that the economy is "projected to improve gradually". A central bank statement after Wednesday's meeting said the baht's direction "has become more conducive to the economic recovery".
Bank of Tokyo-Mitsubishi UFJ's Ino said the possibility of further monetary easing by the Bank of Thailand at its next policy meeting in August will hinge on moves in the Thai baht. "The only thing that can be said now is that there is such a possibility. To get a sense of whether the chances will rise or fall, you will have to watch the exchange rate," he said. The recent rate cuts came amid calls by exporters for a weaker baht to boost competitiveness of Thai shipments. The baht has weakened following surprising rate cuts in March and April, plus other measures aimed at holding the currency down. It has fallen about 2 percent against the dollar since the end of April.
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