Asian emerging market currencies fell along with regional equities on Friday, as investors rebalanced their portfolios before a busy week of central bank meetings and the US-North Korea summit. The European Central Bank, US Federal Reserve and Bank of Japan meet next week to review policy, while the US-North Korea summit takes place on Tuesday in Singapore. The Group of Seven industralised nations will also hold a summit this weekend.
"We are seeing a bit of a risk-off tone, equity markets across the board in Asia are down and that is filtering through into Asian currencies," said Khoon Goh, head of Asia research for ANZ. Investors are looking out for the Federal Reserve's dot plots and growth outlook at the meeting ending Wednesday and the ECB is expected to debate whether to end its quantitative easing programme later this year.
Ahead of the G7 summit in Canada which starts later on Friday, markets are on edge as leaders of the group appear set to clash on trade issues. Among Asian currencies, the Singapore dollar maintained a fairly even keel on Friday. The Taiwan dollar fell a relatively modest 0.15 percent, while Indonesia's rupiah lost 0.36 percent.
The Chinese yuan weakened 0.18 percent on a day when the People's Bank of China loosened the yuan mid-point for the first time in four sessions, setting it at 6.4003 to the US dollar. Malaysia's ringgit weakened 0.18 percent, while the country's benchmark equity index was trading as much as as 0.7 percent lower. Thailand's baht eased 0.28 percent, in step with a 0.2 percent decline in the benchmark for Thai shares.
The South Korean won's 0.5 percent loss made it the second-biggest regional loser on Friday. Profit-taking interrupted the currency's longest winningg streak since November, 2017 The Philippine peso weakened 0.28 percent and the Philippine benchmark equity index dropped as much as 1.1 percent in the wake of data reflecting weaker economic fundamentals.
The Philippines' trade deficit widened to a four-month high in April on robust purchases of capital and consumer goods abroad and as weak demand overseas dented exports. The country's worsening trade gap adds further pressure on the peso, the region's second-worst performer so far this year. India's rupee ended the week by losing 0.53 percent, compounding a 0.31 percent loss on Thursday.
The Reserve Bank of India hiked the key interest rate by 0.25 percent on Wednesday, but also raised the inflation forecast for the second-half of fiscal 2018-19. "For INR, it still has the traditional headwinds of oil prices; current elevated levels will continue to put upward pressure on inflation and lead to near-term deterioration of the current account," said ANZ's Goh.
"Despite the RBI hiking this week, there is a need for them to move again...there will be some pressure on the Indian rupee in the near term."