Most Asian currencies traded within a tight range on Friday as optimism on possible progress in the US-China trade war was offset by strength in the dollar. The greenback firmed after the Wall Street Journal reported on Thursday that US Treasury Secretary Steven Mnuchin has considered lifting some or all tariffs imposed on Chinese imports.
However, a Treasury spokesperson later denied the report. Regional markets remain sceptical as earlier in the week, United States Trade Representative Robert Lighthizer had reportedly said he did not see any structural progress during Sino-U.S trade talks in Beijing last week.
Leading declines in the region, the Indian rupee softened as much as 0.3 percent in early trade. The currency was poised to decline about 1 percent this week as economic data pointed to signs of slowing growth. The currency was the worst performer last year and continues to show signs of weakening as economists expect the central bank to ease monetary policy.
Indian business leaders on Thursday urged the central bank to cut its benchmark interest rate and lower banks' cash reserve ratio to make it easier to borrow. Elsewhere, the Philippine peso also faltered 0.2 percent and was on track to weaken 0.7 percent this week, snapping four straight weeks of gains. The Chinese yuan was steady against the greenback on Friday but was set for its first losing week in five.
In a move to support the cooling economy, the Chinese central bank announced significant liquidity injections this week, seeking to avoid a cash crunch ahead of a long holiday period. The Korean won and the Thai baht inched up, while the Singapore dollar and the Malaysian rinngit edged lower.
The rupiah was slightly lower against the dollar leaving it set for a 1 percent decline this week, its first week of losses since the new year. On Thursday, the Indonesian central bank held its key interest rate unchanged and the governor indicated that its cycle of aggressive rate hikes was "near its peak", thanks to "dovish" signals by the US Federal Reserve.
"However, down the road, if the dot plots change to indicate that the Fed will pause for 2019, we don't believe BI would consider a cut unless there are clear signs that the trade balance and current account deficit are narrowing and that growth falls below trend," OCBC Bank said in a note to clients on Thursday.