Most Asian currencies edged higher against the dollar on Wednesday, with the Thai baht hitting a more than six-year peak, as investors held their ground amid a fresh escalation in Sino-U.S. tensions ahead of high-level trade talks.
Relations between the world's two biggest economies worsened after the U.S. government widened its trade blacklist to include some of China's top artificial intelligence startups, which drew a sharp rebuke from Beijing.
Such altercations just days ahead of the high-level talks dampened hopes of a deal to be struck at the negotiation.
"Expectations for the high-level trade talks are very low. Thus, any news that suggests a further deterioration in the U.S.- China relationship has been broadly priced in," said Eugenia Fabon Victorino, head of Asia strategy at Skandinaviska Enskilda Banken.
The Chinese yuan <CNY=CFXS> opened slightly weaker before firming 0.1%, while the Singapore dollar <SGD=> and the Taiwan dollar <TWD=TP> remained largely unchanged.
Meanwhile, the Indonesian rupiah <IDR=ID> slipped 0.2%, while the Indian rupee <INR=IN> and the Malaysian ringgit <MYR=> weakened marginally.
South Korean financial markets were closed for a holiday.
The baht <THB=TH> strengthened 0.3% against the dollar to its strongest since June 2013, with traders shrugging off the central bank's worries about the currency's strength.
The baht has been the strongest performer among Asian units this year, driven by the country's hefty current account surplus and fund inflows. It has also shown a resilience to global volatility over the U.S.-China trade spat.
The peso <PHP=> firmed 0.3% after the central bank governor indicated that last month's rate cut may be the last for the year.
However, Governor Benjamin Diokno said the central bank will deliver more cuts in the reserve requirement ratio (RRR) should the inflation outlook continue to improve.
Inflation eased in September to the lowest in more than three years, putting this year's inflation target within reach.