ENGALURU: A surge in U.S. bond yields supported the dollar on Wednesday and knocked most Asian currencies, with the Thai baht and the Indonesian rupiah suffering the biggest losses.
A solid rise in U.S. consumer spending numbers sent long term Treasury yields surging to a seven-year peak of 3.095 percent.
"There's permanence building as waves of fresh dollar longs hit the books," Stephen Innes, head of trading APAC at Oanda, said in a note, as the greenback hovered around a five-month high.
Denting risk was news that North Korea called off high-level talks with Seoul, throwing into question June's planned historic summit between Kim Jong Un and U.S. President Donald Trump.
Pyongyang denounced US-South Korean military exercises as a provocation.
"This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently," JPMorgan analysts wrote in a note.
The South Korean won fell 0.3 percent to 1077.2 per dollar.
The Indian rupee recovered some losses following Tuesday's volatile session, as suspected intervention by the Reserve Bank of India for a second consecutive day stemmed the rupee's fall.
A senior dealer at a state-run bank, estimated that within the first 10 minutes the RBI might have sold $300 million to $400 million proactively to prevent any sharp fall in the rupee.
Some dealers had anticipated that the RBI might refrain from intervening on Wednesday as they suspected intervention on Tuesday had failed to stop the rupee hitting its weakest level since in over a year.
The Karnataka state election that concluded on Tuesday delivered a hung parliament with India's ruling BJP emerging as the strongest party. The Karnataka elections are the first major state election ahead of 2019 general elections.
The rupiah weakened to its lowest point in over two-and-a-half years at 14,105, a day before a key central bank policy decision.
Bank Indonesia is expected to hike its benchmark rate for the first time since 2014 to support the rupiah and stabilise domestic markets, a Reuters poll showed.
Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken, believes the "hike is priced in and markets are watching the forward guidance."
If they hike and say that's enough... the rupiah will keep weakening," he said. "If they hike and say we are ready to hike more, that should help the rupiah stabilize."
Thailand's baht weakened 0.5 percent to 32.08 hours ahead of a central bank meeting that is expected to keep rates unchanged to support economic growth amid subdued inflation.
"Despite inflation picking up to the fastest in more than a year... we think Bank of Thailand is still expected to keep policy rate unchanged for the time being," Mizuho Bank said.
April's annual headline inflation was the highest in 40 months, but was still at the low end of the central bank target range. - Reuters