Most Asian currencies drop on Fed uncertainty; U.S. payrolls eyed

By Christina Martin

(Reuters) - Most emerging Asian currencies edged lower on Thursday, taking their cue from regional equities, after minutes from the Federal Reserve's last meeting showed a lack of consensus on the future pace of U.S. interest rate increases.

The U.S. central bank policymakers were increasingly split on the outlook for inflation and how it might affect policy tightening in the future, according to the Fed minutes released on Wednesday.

U.S. stock prices were up slightly at the close of trade while yields on U.S. government debt dipped. The dollar was little changed against a basket of currencies.

"FOMC minutes confirmed that the Fed is moving forward to unwinding the Fed's balance sheet later this year," said Philip Sung Seng Wee, senior currency economist at DBS Bank Ltd.

 

The details of the meeting showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

In Asian currencies, the Philippine peso slumped to a near 11-year low, while the Indian rupee inched up.

The Taiwan dollar touched more than a 12-week low, falling as much as 0.2 percent but was the second biggest gainer after Vietnam in the Asia-Pacific region for June, up 3.53 percent. (http://tmsnrt.rs/2t8oBZ7)

"The major change for Asia ex-Japan currencies going from the first half into the second half of the year is that more major central banks have joined the U.S. in talking about exiting their loose monetary policies," said Wee.

"The markets are also alert to Friday's U.S. jobs report, and next week's semi-annual congressional testimonies by Fed Chair Janet Yellen."

The U.S. non-farm payrolls data for June, due on Friday, will be keenly watched for a steer on Fed policy.

KOREAN WON

South Korea's won fell as much as 0.3 percent to a near four-month low on Thursday, as the greenback stayed solid against Asian currencies after Fed's minutes while concerns over North Korea lingered.

The Korea Composite Stock Price Index (KOSPI) was down 0.2 percent at 2,384.13 points.

Foreign net investment in Korean equities in June was the highest, compared to other Asian peers. (http://tmsnrt.rs/2uMxTIr)

THAI BAHT

The Thai baht slipped to over a three-week low on Thursday, its fourth straight day of declines.

Thailand's consumer confidence in June declined for a second straight month, hitting its lowest in five months, on worries about the country's economic recovery, global uncertainty and low commodity prices, a private survey showed on Thursday.

The Bank of Thailand on Wednesday slightly raised its 2017 economic growth forecast to 3.5 percent from 3.4 percent seen in March. Last year's growth was 3.2 percent.

(Reporting By Christina Martin in Bengaluru; Editing by Shri Navaratnam)