The South Korean won staggered on Friday and headed for its third week of losses on renewed North Korean fears, while the Indian rupee fell to a 5-month low on concerns the government may need to borrow more to boost growth. North Korea said on Friday it might test a hydrogen bomb in the Pacific Ocean after US President Donald Trump vowed to destroy the country, with leader Kim Jong Un promising to make a "mentally deranged" Trump pay dearly for his threats.
The won slipped for a second straight session to its lowest in a month, while most other emerging Asian currencies were mixed. "We're too used to the North bluffing." said Jonghyun Kim, an FX trader at Kookmin Bank. "Nuclear weapon is NK's only bargaining chip right now. They want the image that they are at par with the US, military-wise. The won will be affected by the headline yes, but we need more than that." he added.
Among other Asian currencies, the Indonesian rupiah hit over two-week low, while the peso appreciated as much as 0.4 percent and was on track to post gains on the week. As expected, the Philippine central bank held its key interest rate steady on Thursday, predicting inflation will remain within its comfort range this year and next. On the same day, Taiwan's central bank left its policy rate unchanged, saying inflation was expected to be mild against a backdrop of rising pressure on the trade and economic fronts.
The Taiwan dollar rose to its highest in over two weeks on Friday before turning flat, and was on course for second week of lossses. The yuan firmed as much as 0.3 percent but pared gains and was flat as of 0330 GMT. S&P Global Ratings said China's deleveraging process will be much more gradual than expected in the next few years, a day after it downgraded the country's sovereign credit rating. INDIAN RUPEE
Rupee hurdled above the 65 level and was on track for its biggest weekly fall since August 2015. "The reaction is more to do with the Indian side of the news. The government is now in a situation where it might be borrowing more or spending to spur growth," said Hiren Sharma, Founder And Managing Partner of Mumbai-based Portia Advisory Services.
"However, I think this is decent, post the comeback from the levels last seen in February." he added. Finance Minister Arun Jaitley had said on Wednesday that India was considering ways to revive its slowing economy and will unveil the "necessary" steps once Prime Minister Narendra Modi approved them. The currency hit its lowest level in more than two months in the previous session.
Rupiah traded soft ahead of a central bank meeting, where policymakers are widely expected to keep the benchmark interest rate unchanged, following a surprise cut last month. "We are expecting them to leave the policy rate unchanged. Meanwhile, they may signal room for further rate cuts with a dovish stance" said Qi Gao, Asia FX Strategist at Scotiabank. Rupiah was heading for its second week of losses on Friday. Malaysian markets were shut for a holiday.