Asian currencies gained Thursday, recovering from the worst two-day rout in almost 20 years after China reassured markets it would not engage in a currency war.

Emerging market currencies including the Indonesian rupiah, Philippine peso and South Korean won rose slightly against the dollar after China Thursday devalued the yuan by 1.1 percent.

The cut, which was smaller than those in the previous two days, and news the central bank intervened to stabilise the yuan on Wednesday reassured dealers Beijing would not allow its currency to slump.

"It's likely the worst is over," Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong, told Bloomberg News.

"PBoC (People's Bank of China) intervention has calmed the market. There is not a sense that the onshore yuan will weaken forever."

In Tokyo late afternoon trade the dollar changed hands at 124.49 yen, up from 124.24 yen in New York, where it took a hit on fears Beijing's moves underscored weakness in China's economy and could delay a US interest rate hike.

China's latest devaluation comes after the two previous cuts, on Tuesday and Wednesday, sparked concerns that the world's number two economy is weaker than previously thought.  

The move sent Asia-Pacific currencies plummeting, pushing the Malaysian ringgit to 17-year lows, on fears the cut could hurt other regional economies and spark a race to the bottom by central banks in a bid to keep their exports competitive.

On Wednesday, Vietnam doubled the trading band for the dong, allowing the currency to weaken to try to make exports more competitive as China falls.

Analysts warned, however, that Asia-Pacific currencies are still at risk after suffering their worst two-day selloff since 1998.

"The talk of China joining a currency war could set out a round of competitive valuation in the region," said Aidan Yao, senior emerging market economist at AXA Investment Managers.

"This, coupled with the anticipated Fed tightening, may trigger massive capital outflows that lead to catastrophic consequences for Asia."

In other trading, the euro changed hands at $1.1122 and 138.46 yen, weaker than $1.1159 and 138.63 yen in New York.

Traders are keeping an eye out for US retail sales data later this week, with upbeat results likely to boost speculation the Federal Reserve could lift rates this year. A rate rise is a plus for the dollar.

The dollar eased against most Asia-Pacific currencies, sliding to Sg$1.3971 from Sg$1.4135 on Wednesday, to Tw$32.20 from Tw$32.50, to 13,766 Indonesian rupiah from to 13,825 rupiah, and to 35.18 Thai baht from 35.55 baht.

It also weakened to 46.18 Philippine pesos from 46.33 pesos, and to 1,174.55 South Korean won from 1,189.75 won.

The Australian dollar firmed to 73.59 US cents from 72.62 cents on Tuesday, while the Chinese yuan fetched 19.39 yen against 19.47 yen.