Most emerging Asian currencies eased on Friday to give up some of their weekly gains as caution grew ahead of the US Federal Reserve's policy meeting and the Brexit vote. South Korea's won fell in subdued trading as the central bank governor said the Bank of Korea plans to keep monetary policy accommodative, a day after it cut its policy interest rate to a record low.
The Malaysian ringgit tracked lower oil prices overnight, while the Indonesian rupiah slid on lower government bond prices. Regional stocks retreated as investors shunned risky assets amid concerns about a UK referendum on June 23 that could push Britain out of the European Union.
The US dollar advanced against a basket of six major currencies as data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly fell last week, indicating sustained strength in the labour market despite a sharp slowdown in May. The solid weekly data is unlikely to boost expectations for a Fed rate hike at its two-day policy meeting starting from Tuesday, but the indicator is strong enough to unwind some of the bullish bets on emerging Asian currencies, analysts and traders said. "Even though the Fed is not likely to hike next week, the market may stay cautious on its stance," said Qi Gao, an emerging Asian currency strategist for Scotiabank in Singapore.
Most emerging Asian currencies have risen so far this week as a surprisingly weak US nonfarm payrolls number for May erased prospects of an imminent US interest rate increase. Regional currencies found further support as better-than-expected Chinese imports in May added to some hopes of stabilisation in the world's second-largest economy. The rupiah led weekly gains among emerging Asian currencies with a 2.1 percent jump against the dollar so far this week. That would be the largest weekly appreciation since early October, according to Thomson Reuters data.
Waning views on US tightening led investors to seek higher yields and the rupiah was a main beneficiary as Indonesia offers one of the highest returns in the region. The ringgit has risen 1.9 percent so far as crude prices hit 2016 highs earlier this week, easing concerns over Malaysia's falling oil and gas revenues.
The won has advanced 1.7 percent this week as investors unwound some bearish bets on the regional laggard due to the dollar's weakness, offsetting the impact of a surprise interest rate cut by the Bank of Korea to a record low of 1.25 percent on Thursday. Taiwan's dollar rose 1.2 percent in the holiday-shortened week as foreign investors continued to buy local stocks. Financial markets were closed on Thursday and Friday for the Dragon Boat Festival.
The Thai baht has gained 1.0 percent so far this week on stock and bond inflows. India's rupee has appreciated 0.6 percent, while the Philippine peso has gained 0.7 percent this week. "Given the recent strength, Asian currencies are likely to see some corrections," said Yuna Park, currency and bond analyst at Dongbu Securities in Seoul.
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