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Emerging FX-Asia retreats as market rethinks

Written by: Staff

Singapore, Mar 23: Asian currencies dipped on Friday, backing off Thursday's multi-month peaks versus the dollar, on a growing view that U.S. interest rates may be on hold for a while despite a softening in the Federal Reserve's stance.

At a meeting this week, the Fed left rates steady and removed a reference to possible further interest rate rises in its policy statement. This had boosted hopes in the market of a near-term cut in rates, sending the dollar lower across the board.

But although Asian currencies were softer as the market reassessed its Fed view, sentiment towards regional units remained positive given signs of a rebound in risk appetite.

''Today there is a little bit of a dollar revival. This doesn't necessarily have anything to do with Asia,'' said Sean Callow, a currency strategist at Westpac Bank.

''Maybe people are thinking they got a bit carried away with dollar weakness and what the Fed meant.'' The Singapore dollar fell as far as 1.5200 per U.S. dollar, almost 0.25 percent off a 9-{ year high traded on Thursday.

South Korea's won traded at about 938 per dollar, against the previous day's one-month peak around 936, and the Malaysian ringgit pulled away from Thursday's nine-year high around 3.4560 per dollar to trade at 3.4690.

In a sign that appetite for high-yielding currencies is recovering from this month's market volatility, the Philippine peso gained as much as 0.25 percent to 48.12 per dollar -- outperforming other Asian currencies.

High-yielding currencies like the peso and Indonesian rupiah were particularly hard hit by a sell off in global markets earlier this month amid worries about the U.S. economic outlook.

But in recent sessions, equity markets have stabilised, lending support to local currencies. The peso has risen about 0.9 percent his week, while the rupiah has gained about 1.2 percent.

''We have seen strong demand for Philippine stocks and there is appetite for risk, so we will see more interest in the peso,'' said a dealer in Manila.

Philippine shares rose to a three-week high on Thursday, but opened slightly softer on Friday.

The trader said corporate demand for U.S. dollars and central bank intervention had capped the peso's gains.

''We have seen central bank bids for dollar/peso around the 48.12 level -- if it wasn't for this we would have seen dollar/peso lower,'' he said.


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