Most emerging Asian currencies slid on Friday ahead of a key US jobs report, with regional units set to see weekly losses on anxiety over the fallout from the Brexit vote. China's yuan edged down as a surprise rise in June foreign exchange reserves suggested the central bank may be scaling back suspected interventions in support of the renminbi.
The Chinese currency was on course for a fifth straight week of depreciation, the longest weekly losing streak in nearly seven months. The South Korean won and the Malaysian ringgit eased in thin trading as traders added dollar holdings ahead of US nonfarm payrolls data for June due later in the day. The consensus forecast is for 175,000 new jobs for June, according to a Reuters poll. Data on Thursday already showed US private payrolls increased more than expected last month as small businesses ramped up hiring, while fewer Americans applied for unemployment benefits last week.
"In the event of upside surprises in tonight's US jobs data, the bond market will have to ask itself if it had been too hasty in using Brexit as an excuse to remove all expectations for the Fed to hike this year," analysts for DBS said in a note. Still, many analysts and traders said a solid US jobs data may not necessarily revive expectations of a near-term interest rate hike by the Federal Reserve. Investors have virtually priced out short term rate hikes in the United States on concerns over the negative impact on the global economy and financial markets from Britain's vote to leave the European Union.
"The Fed will have a very small window to raise rates this year. I expect only one hike at most for 2016, but I doubt they will be able to do so," said a senior Philippine bank trader in Manila. The yuan has eased 0.4 percent against the dollar so far this week for the fifth straight weekly loss, longest such losing streak since mid-December. Bets on further declines in the renminbi hit a five-month high in the last two weeks on expectations that the central bank will allow it to weaken further to support the world's second-largest economy, a Reuters poll showed on Thursday.
"The CNY will of course stay weak and will be impacted by the weaker GBP and EUR, given China's large trade ties with the EU," said Heng Koon How, a senior currency Strategist for Credit Suisse Private Banking Asia Pacific. "Asian FX will tend to remain soft alongside the CNY as market sentiment remains rather risk adverse." The won led regional weekly losses with a 1.4 percent slide against the dollar, as offshore funds sold the best-performing emerging Asian currency last week.
The ringgit has eased 1.2 percent in the holiday-shortened week to mark the end of the Muslim fasting month. Most of Malaysia's government bond prices fell on Friday. The Philippine peso has lost 0.4 percent, while the Singapore dollar has skidded 0.3 percent. Taiwan's dollar fell 0.3 percent.