Most emerging Asian currencies edged up on Friday thanks to a rebound in China's yuan, although regional units were set to suffer weekly losses on the US Federal Reserve's interest rate hike and a weakening trend in the renminbi. The Taiwan dollar rose on exporters' demand for settlements but its upside was limited with foreign investors selling the currency following the island's central bank's unexpected interest rate cut on Thursday.
The yuan turned firmer after hitting a fresh 4-1/2-year low as the People's Bank of China was spotted intervening via state banks to control the pace of the currency's depreciation. Singapore's dollar rose on the yuan's rebound. The city-state's unit closely follows the renminbi as traders and analysts believe the Chinese unit to be a part of the undisclosed currency basket used by the Monetary Authority of Singapore to manage its monetary policy.
The Malaysian ringgit advanced with thin liquidity as traders covered bearish bets in the worst-performing Asian currency of the year ahead of the weekend. Still, gains in emerging Asian currencies were seen just as profit-taking from the US dollar's strength and unlikely to sustain, traders and analysts said. The dollar retreated from a two-week high against a basket of six major currencies.
"I expect Asian currencies to remain under pressure. It is not just the Fed hiking rates, but also the decline in the yuan and downside growth risks in the region," said Khoon Goh, senior FX strategist for ANZ in Singapore. The Fed on Wednesday raised interest rates for the first time in nearly a decade. Risks of capital outflows from emerging Asia grew as investors may relocate funds from the region, he said. Regional currencies are unlikely draw support from the Bank of Japan's decision to expand the type of assets it purchases, Goh and other analysts said.
The Taiwan dollar rose 0.5 percent to 32.882 per the US dollar as of 0615 GMT from Thursday's close of 33.035. Local exporters sold the greenback for settlements. That compared with Thursday's levels around 32.800 before the central bank weakened it, traders said. Most emerging Asian currencies were on the course for weekly depreciation.
The yuan has slumped 0.4 percent against the dollar so far this week, which would be its seventh straight weekly slide, the longest weekly losing streak since 2005 when the currency was revalued. China's central bank continued to set its daily guidance rate at lows in 4-1/2 years. Indonesia's rupiah has lost 0.4 percent so far this week on growing corporate dollar demand for year-end payments. The Philippine peso has also eased 0.4 percent so far this week. The South Korean won ended the week down 0.3 percent as foreign investors kept selling Seoul shares. Thailand's baht was down 0.2 percent.
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