Asian currencies pressured as dollar rebounds from 7-week lows

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SINGAPORE (Jan 27): Most emerging Asian currencies edged lower in holiday-thinned trade on Friday, after the dollar rebounded on the back of optimism over the U.S. economic outlook and corporate earnings.

The Thai baht and Philippine peso eased 0.1%, while the Indonesian rupiah and the Indian rupee were both down about 0.2% on the day. 

The dollar rose broadly, and against a basket of six major currencies, it gained 0.3% to 100.67, pulling away from Thursday's seven-week low of 99.793. 

Most Asian currencies are on track for monthly gains so far in January, having enjoyed a lift as investors pared back their bullish bets on the greenback.

While U.S. equities and Treasury yields have extended their gains in the past week, fuelled by a positive U.S. economic outlook and President Donald Trump's signals of new public spending, concerns over potentially new trade barriers have weighed on the dollar in the last two weeks.   

"There's still uncertainty in the sense that markets are still trying to get a grip on Trump's policies," said Mitul Kotecha, head of Asia macro strategy for Barclays in Singapore.

"There was such an expectation and build-up of positioning," Kotecha said, adding that bearish bets against Asian currencies and long positions in the dollar have recently been pared back.

Reuters poll conducted this week showed sentiment towards emerging Asian currencies has generally improved in the last two weeks.

Investors were estimated to have sharply reduced their bearish bets against the Chinese yuan, in the wake of Beijing's recent clampdown on capital outflows and speculators.

The recent stability in the yuan's moves against the dollar has helped bolster sentiment towards emerging Asian currencies, said a trader for a Japanese bank in Tokyo.

"The yuan is acting like an anchor," the trader said, adding that one focus is how the yuan moves, after the Lunar New Year holiday and to what extent the Chinese authorities will let the market determine the yuan's moves.    

Onshore trading in the yuan, won, and the Taiwan dollar were closed on Friday, as China, South Korea and Taiwan markets were shut for the Lunar New Year holidays.

CURRENCIES VS U.S. DOLLAR
Change on the day at 0517 GMT

Currency Latest bid Previous day Pct Move
Japan yen 114.96 114.53 -0.37
Sing dlr 1.4263 1.4268 +0.04
Taiwan dlr* 31.360 31.360 +0.00
Korean won* 1159.20 1159.20 +0.00
Baht 35.29 35.26 -0.10
Peso 49.875 49.805 -0.14
Rupiah 13355 13335 -0.15
Rupee 68.17 68.07 -0.15
Ringgit 4.4280 4.4270 -0.02
Yuan* 6.8807 6.8807 +0.00

Change so far in 2017

Currency Latest bid End prev year Pct Move
Japan yen 114.96 117.07 +1.84
Sing dlr 1.4263 1.4490 +1.59
Taiwan dlr 31.330 32.279 +3.03
Korean won 1170.07 1207.70 +3.22
Baht 35.29 35.80 +1.45
Peso 49.88 49.72 -0.31
Rupiah 13355 13470 +0.86
Rupee 68.17 67.92 -0.37
Ringgit 4.4280 4.4845 +1.28
Yuan 6.8807 6.9467 +0.96

 * Taiwan's financial markets are closed from Jan 27 to Feb 1.
 * South Korean financial markets are closed on Friday for a public holiday. Trade resumes on Jan 31.
 * Chinese financial markets will be closed from Jan 27 to Feb 2 for the Lunar New Year holiday.