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Asian Currencies Hold Steady, Still Wary About Intervention

Asian currencies were broadly steady on Thursday, pausing after strong gains earlier in the week as operators were wary about central bank intervention to restrain their currencies.

Central banks in Singapore, the Philippines and Malaysia have been suspected of stepping into the market this week to buy U.S. dollars as regional currencies rose on the back of an equity market rally and bullishness about economic growth.

A meeting of the Group of Seven industrial nations, starting on Friday in Washington, was another reason for markets to move sideways for now, dealers said. Analysts say the G7 may renew calls for currency flexibility in Asia, with a focus on China.

The South Korean won touched a one-week high at about 931 against the dollar amid foreign buying of Korean shares.

It showed little immediate reaction to a widely expected decision by the Bank of Korea to hold its benchmark interest rate steady at 4.50%.

The Singapore dollar was little moved at about 1.5180 against the
dollar, holding almost half a percent below this week's 9-1/2-year high as caution about central bank intervention lingered.

The Philippine peso dipped to the weaker side of 48 against the dollar but held within sight of Wednesday's six-year high of 47.90 pesos.

Global financial markets have stabilized after a wobble last month and that has led to a resumption of carry trades -- selling low-yielding currencies such as the Japanese yen to fund investments in higher-yielding assets such as Asian stocks and currencies.

"The market is trapped in a range. The only thing going on is the carry trade still," said a trader at Bayerische Hypo und Vereinsbank.

Thio Chin Loo, a currency strategist at BNP Paribas, said optimism about economic growth meant it was only a matter of time before Asian currencies renewed their climb. "Markets are still focused on the strong growth story and this is supportive for risk appetite," she said. "This is a good environment for Asian currencies and I would expect to see a further push to the upside against the dollar."

Emerging Asia, driven by China and India, faces a "very positive" near-term growth outlook and should be able to withstand a U.S. slowdown, the International Monetary Fund said on Wednesday in its twice-yearly World Economic Outlook.