The South Korean won bounced back on Thursday on suspected intervention by foreign exchange authorities, though escalating Sino-US trade tensions curbed investors' appetite for riskier currencies. On Thursday, a Chinese diplomat said that provoking trade disputes is "naked economic terrorism" in comments that stepped up criticism of Washington as the standoff between the two economic heavyweights showed no signs of a quick resolution.
While US President Donald Trump this week dampened any hopes of an imminent trade deal, China has hinted that it may use its dominant position as an exporter of rare earths to the United States as leverage in the tariff war.
"The trade war continues to see an expansion in scope, with the talk of using rare earths as a weapon for the Chinese really picking up momentum over the past two sessions. This sets a negative backdrop for Asian currencies as a whole," said analysts at OCBC Bank in a research note.
As sellers buffeted currencies in several countries including China, South Korea and Malaysia, some officials have issued warnings against disorderly currency market movements.
Earlier this week, the Trump administration said nine trade partners required close attention over currency practices and the list included as many as six Asian countries - China, Japan, South Korea, Malaysia, Singapore and Vietnam.
The won rose as much as 0.5% after the country's foreign exchange authorities were suspected to have sold dollars to curb weakness in the currency, several dealers told Reuters.
South Korea's central bank reviews policy on Friday and a Reuters poll predicted the Bank of Korea would keep the key rate unchanged despite pressure to ease due to slowing global demand for the country's exports.
Another currency which outperformed its peers on the day was the Philippines peso, which added as much as 0.3%, and is set to snap a three-session losing streak.
The Chinese yuan tacked on 0.1% but it remains on track for its worst month since July 2018, having shed about 2.5% to the dollar since a flare-up in tensions between Washington and Beijing earlier this month.
The Thai baht, the best performing currency so far this year with a gain of about 2.5%, strengthened for a second day.
The analysts at OCBC Bank expect some upside for the baht as Thailand could benefit from the recent rebalancing of the MSCI emerging markets index.
The Indian rupee and the Singapore dollar gained slightly, while the Taiwan dollar and the Malaysian ringgit weakened a bit.
The Indonesian markets were closed on Thursday for a holiday.
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