SINGAPORE: Most emerging Asian currencies eased on Friday and were set to suffer weekly losses on broad strength in the dollar, with US interest rates expected to rise for the first time in around a decade later at time when the European Central Bank is expected to add extra stimulus.
The Chinese yuan was poised to post its longest weekly losing streak in five months as the central bank set its daily guidance rate at a three-month low. That came ahead of the International Monetary Fund's meeting on Monday to decide whether to include the yuan in its reserve basket.
As the dollar rose against a basket of six major currencies, especially the euro, in thin trading after US Thanksgiving Day holiday, emerging Asian units also lost ground.
The Indian rupee struck a two-year low.
The ECB is expected to opt for more stimulus at a policy meeting next week, while the US Federal Reserve is widely expected to raise interest rates next month.
Any stiumulus from the ECB could could help emerging Asian currencies resist a strong dollar as it may lead investors to use the extra euro to fish for higher yields in the region, analysts said.
"The impact from the ECB's move will have different impact on the dollar and Asian currencies," said Jeong My-young, Samsung Futures' research head in Seoul.
"If the ECB aggressively eases, that will create more liquidity. That is not negative to Asia."
YUAN DOWN
The yuan was set to weaken 0.1 percent against the dollar for the week. Barring a late move to positive territory, it will be the yuan's fourth week of depreciation and the longest weekly losing streak since the week ended June 19, according to Thomson Reuters data.
The IMF is expected to announce on Monday the inclusion of the renminbi in the Fund's Special Drawing Rights basket. Some traders expected the Chinese currency to weaken after joining in the basket partially due to a slowdown in the world's second-largest economy.
Profits earned by Chinese industrial companies fell 4.6 percent in October from a year earlier, declining for the fifth consecutive month, data showed earlier.
The yuan's bearish bets rose to a three-month high in the last two weeks when sentiment towards most emerging Asian currencies improved, a Reuters poll showed on Thursday.
The Indian rupee underperformed regional currencies having lost 0.8 percent so far this week on month-end dollar demand from importers.
Earlier on Friday, the rupee fell to 66.895 per dollar, its weakest since September 2013 on the greenback's broad strength. The Indian central bank likely sold the dollar through state-own banks to stem the rupee's weakness, traders said.
Indonesia's rupiah has slid 0.7 percent throughout this week on corporate dollar bids for month-end payments.
The Thai baht has eased 0.2 percent for the week, while the Philippine peso was down 0.1 percent.
In contrast, the Malaysian ringgit has risen 1.2 percent so far this week, helped by China's support and a rebound in crude prices, which eased concerns over Malaysia's falling oil and gas revenues.
Adding to support, debt-ridden state fund 1Malaysia Development Bhd agreed to sell its energy business in a $2.3 billion cash deal to China General Nuclear Power Corporation.
China will buy more Malaysian government bonds to help stabilise its financial markets, Premier Li Keqiang announced, according to state news agency Xinhua.
The Singapore dollar has also gained 0.2 percent throughout this week as data showed the economy grew much faster than initially estimated in the third quarter.
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