Asian currencies stepped back from the previous session's highs on Friday, as investors awaited second quarter US economic growth data due later in the day. Asian currencies had rallied on Thursday after the US Federal Reserve's cautious inflation assessment sent the dollar to 13-month lows and rekindled interest in emerging markets.
Economists expect the world's largest economy to have grown around 2.6 percent in the second quarter, from 1.4 percent in the first quarter. A solid reading could underpin the dollar and slow net portfolio inflows to Asian currencies. In Asia, the Korean won edged down against the dollar after hitting four-month highs on Thursday. The won stands to end the week slightly lower, after two weeks of gains.
South Korean shares slid to a two-week low early on Friday, on track for a weekly loss. "There's a bit of positive backwash for the USD from overnight against G10 and EM FX, so regional pairs are reacting in sympathy today," said Emmanuel Ng, FX strategist at Oversea-Chinese Banking Corporation.
"Plus, the net portfolio inflow story is not exactly brimming with support for Asian currency strength in the near term," he added. The Indian rupee stepped back from a two-month high against the dollar. The currency is on track to gain for its third consecutive week. The Thai baht did not trade due to a national holiday.
China's yuan pulled away from a nine-month high against the dollar on Friday, after the central bank fixed a weaker mid-point and the dollar eased off multi-month lows. Before the market opened, the People's Bank of China set the midpoint rate at 6.7373 per dollar, weaker than the previous fix of 6.7307, which was its strongest in nine months and its biggest one-day rise in percentage terms since June 28. The yuan is still on track to gain for its third consecutive week against the dollar.