Most emerging Asian currencies weakened on Wednesday, as the dollar gained on renewed fears over a chaotic exit of Britain from the European Union, while trading in the region was subdued ahead of the holiday season.
Britain on Tuesday set a hard deadline of December 2020 to reach a new trade deal with the EU, trying to pressure Brussels to move more quickly to seal an accord.
The plunge in the pound supported the dollar to its highest in a week against a basket of currencies.
“There is no real motivation to be taking on strong directional views, especially with the fact that major risk events are out of the way, so the scope for volatility is reduced,” Wei-Liang Chang, a forex and credit macro strategist at DBS Bank said.
“There is some softness in activity since we are heading towards the Christmas season…which is why we aren’t seeing any drastic moves except for the case of sterling.”
The Taiwan dollar led gains in the region, strengthening 0.2 percent to the dollar for a fifth straight day. The currency has regained footing this year on the back of improving exports and growth prospects and a pick up in equity inflows.
The Indonesian rupiah and Singapore dollar edged lower, while the S. Korean won eased from a 1-month high hit in the previous session.
Markets will focus on Indonesia’s central bank policy meeting on Thursday, where it is widely anticipated to keep rates unchanged after a series of policy loosening steps aimed at lifting economic growth.
The Indian rupee was marginally lower, while the Chinese yuan inched lower on rising corporate demand for the greenback.
The Thai baht TH depreciated 0.2 percent against the greenback, ahead of the central bank policy decision later in the day.
Bank of Thailand (BoT) is expected to leave its benchmark interest rate at a record low after two cuts this year, a Reuters poll showed, although it was likely to downgrade its growth outlook again.
“While Baht strength remains one of the main concerns, BoT might prefer to pause and assess how effective the measures it has introduced on capital outflows have been,” a Mizuho Bank note said.
Baht is Asia’s best performing currency this year so far, up 7.6 percent against the US dollar, despite the central bank’s steps to rein in the baht’s gains. – Reuters