Most emerging Asian currencies eased on Friday and were set to post weekly losses as investors sidestepped risk and worried that a strong yen could drive unwinding of carry trades. Malaysia's ringgit hit its weakest level in more than a week, leading the regional slide, as investors booked profits from the best-performing emerging Asian currency so far this year as crude oil prices dropped overnight.
The yuan edged down even though China reported its foreign exchange reserves last month showed their first rise since November, with traders saying the market had already priced the move in. Putting pressure on emerging Asian currencies, the yen hit a 17-month high against the dollar and regional equities fell to three-week lows. The yen fell on Friday after verbal warnings from Tokyo officials against its strength, but the currency is seen staying firm on the dollar's broad weakness.
"Basically, the market remained anxious as Japan's easing policy is being seen to fail," said Jeong My-young, Samsung Futures' research head in Seoul. "A stronger yen is hurting Japanese equities, dragging overall risky assets lower. In addition, that will boost the need for Japanese to sell overseas assets and repatriate the proceeds." The ringgit has lost 0.8 percent against the dollar so far this week after the currency reported gains over the previous five straight weeks.
Most Malaysian government's bond prices eased throughout this week. India's rupee shed 0.3 percent this week as the central bank cut its policy interest rate to 6.50 percent, its lowest in more than five years. The Philippine peso has fallen 0.3 percent so far this week after foreign investors sold Manila stocks in the previous four consecutive sessions.
Taiwan's dollar has eased 0.2 percent, while Thailand's baht was down 0.1 percent. Investors were awaiting Chinese economic indicators next week such as trade and inflation data to check the health of the economy. "Until we see stronger data, it will be tough for risk sentiment to rise," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore. "The balance between easier policy and growth has tipped to growth being more important. Markets are moving towards the fact that easy policy has its limits." The Monetary Authority of Singapore is expected to keep policy steady next week, but a number of economists say a further easing this year remains a distinct possibility in the face of slow growth, low inflation and depressed global demand, a Reuters poll showed.