Asian currencies ended the week mixed against the US dollar after global share prices rebounded and as dealers predicted a rise in Australian interest rates.
JAPANESE YEN: The yen fell back after hitting a four-month high against the dollar as market players resumed yen-carry trades, taking heart from rebounds in global share prices in the wake of credit concerns in the US economy.
After peaking at 117.60 to the dollar on Wednesday, the Japanese unit lost ground to fetch 118.77-80 to the dollar late Friday, still up from 119.05-08 to the dollar a week earlier.
The dollar's midweek slump came as market players closed their positions in high yielding currencies in the wake of slides in US and Japanese share prices due to worries over the US home loan sector.
Investors were concerned about US sub-prime housing loans after American Home Mortgage Investment Corp was reported to be unable to fund new loans as investment banks cut off their credit lines. But rebounds in share prices helped revive yen-carry trades, where investors borrow funds in the low-yielding yen to invest in the dollar and other high-yielding currencies.
Mizuho Corporate Bank market economist Masaki Fukui, however, warned "the sub-prime problem is deeply-rooted." "And amid continuing uncertainty about the outlook, investors cannot be optimistic. They are wary of any bad news," he said before the US Labour Department announced weaker than expected job data on Friday.
The department said the US jobs market softened dramatically in July, with employers adding 92,000 jobs. It was the weakest jobs gain since February and fell far short of the Wall Street consensus forecast of 135,000 new jobs.
Market players are now focused on a meeting of the US Federal Open Market Committee (FOMC) next Tuesday, although interest rates are expected to be left unchanged at 5.25 percent for now.
"The focus is on how an FOMC statement will describe the US economy, including the housing market," the business daily Nikkei said on its Internet edition.
AUSTRALIAN DOLLAR: The Australian dollar is expected to tread water next week amid expectations the central bank will lift interest rates, dealers said. The Aussie was trading at 85.88 US cents at 5:00pm on Friday, up slightly on the previous week's 85.86 US cents.
OzForex senior corporate dealer Euan McCreadie said the market would be closely watching the outcome of the Reserve Bank's monthly monetary policy meeting, to be announced on Wednesday, but had already factored in a rate rise.
McCreadie said this meant reaction to a rake hike would be muted. "We'll probably see about a 10- or 20-point movement either side of where we are now, (but the) Aussie will really struggle to get through that 86 US cents barrier," he said.
Commonwealth bank economist Joseph Capurso said a 0.25 point rise to 6.5 percent was regarded as a near-certainty due to strong inflationary pressures in the Australian economy. "We expect the RBA to lift the cash rate to 6.50 percent," he said.
"Inflation is in the upper half of the (2.0-3.0 percent) target band, the strong economy has tilted the risks to inflation to the upside. "We expect the RBA to retain a tightening bias, so a further rate hike in the first half of 2008 is on the cards."
NEW ZEALAND DOLLAR: The New Zealand dollar ended the week of local trading at 76.80 US cents, down from 78.33 the previous Friday.
The New Zealand dollar plunged in overseas trading at the end of last week amid new turmoil in world markets.
Global volatility on the back of US concerns about sub-prime credit saw the kiwi slip from a 22-year high around 81 US cents last week.
High New Zealand interest rates previously encouraged foreign investors to borrow low interest currencies like the yen to buy the kiwi. But these so-called carry trades are often reversed when market volatility make investors wary of risk. "If we continue to see the sub-prime and equity markets continue to sell off there's chance of further weakness, but after the moves this week it probably needs some sort of consolidation," ANZ Investment Bank foreign exchange manager Murray Hindley said.
CHINESE YUAN: The yuan closed at 7.5650 to the dollar on Friday on the exchange-traded market, compared with Thursday's close of 7.5709, and a closing price of 7.5601 to the dollar the week before.
On the over-the-counter market, it ended at 7.5680 to the dollar against 7.5718 the previous day.
The central bank had set the yuan central parity rate at 7.5683 to the dollar Friday, compared with 7.5723 on Thursday. The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.
HONG KONG DOLLAR: The US-pegged Hong Kong Dollar ended the week at 7.82935, from 7.8235 a week earlier.
INDONESIAN RUPIAH: The rupiah ended the week trading at 9,270/9,275 to the dollar, compared to 9,185/9,195 to the dollar a week earlier.
PHILIPPINE PESO: The Philippine peso traded higher at 45.460 to the dollar on Friday afternoon from 45.720 on July 27.
SINGAPORE DOLLAR: The dollar was at 1.5186 Singapore dollars on Friday from 1.5162 the previous week.
SOUTH KOREAN WON: The won weakened slightly against the US dollar, closing at 922.90 to the dollar on Friday, compared with 921.70 a week earlier.
South Korea's central bank on Friday announced a plan to restrict foreign currency borrowing by local firms to try to curb the currency's recent sharp rise, which is hurting exporters.
Under the curbs, Korean firms from August 10 will be allowed to borrow foreign currency only for capital investment and overseas projects payments.
TAIWAN DOLLAR: The Taiwan dollar fell 0.03 percent in the week to August 3 to close at 32.871 against the US dollar. The local currency closed at 32.861 a week earlier.
THAI BAHT: The Thai baht slipped against the dollar over the past week on profit-taking but continued to trade at near a 10-year high against the greenback, dealers said. The Thai currency closed at 33.84-85 to the US unit on Friday, down from 33.72-74 a week earlier.