Asian currencies were modestly lower on Friday as hopes of tax reform in the United States lifted the dollar to seven-week highs, though improving risk sentiment helped contain the losses. The US House of Representatives approved a fiscal 2018 spending blueprint in an effort to hasten an overhaul of the US tax code, powering Wall Street to new peaks and the dollar to its strongest level since mid-August at one point.
The dollar retained its firm tone ahead of the non-farm payroll data due later in the global day, which is expected to reflect the impact of the hurricanes Harvey and Irma. Economists expect just 90,000 new US jobs for September, down from 156,000 in August, according to a Reuters poll.
Global risk sentiment was also boosted by gains on Wall Street with the S&P index clocking its sixth consecutive record high close, its longest winning streak since 1997. The CBOE Volatility index, which tracks the cost of protection against a decline in the S&P 500, set a record closing low.
"The volatility index made a new low while the S&P index hit a new high suggesting that despite a stronger dollar and prospects of higher yields, the global economic environment still supports risk assets," said Tariq Ali, investment strategist at Standard Chartered Bank. "Hence, though we may see Asian currencies come off a bit in the next few weeks ahead, losses will likely be limited," Ali said.
The Singapore dollar , Taiwan dollar and the Indonesian rupiah are on course for their fourth straight week in the red. The Singapore dollar slipped to its lowest level in over 7 weeks. The Monetary Authority of Singapore will decide on policy on Friday where it's expected stand pat.
Philippine Peso edged 0.2 percent lower and was the worst performer among Asian currencies in the year. China and South Korea markets were closed for holidays. The Indian rupee nudged lower. On a weekly basis, it snapped three consecutive weeks of declines to eke out marginal gains.
Analysts polled by Reuters showed market participants turned bearish on the Indian rupee for the first time in nearly nine months after economic growth unexpectedly cooled to its slowest pace in three years. The Reserve Bank of India is expected to release data on weekly forex reserves today.