Most Asian currencies inch down as dollar gains on funding bill

By Christina Martin

(Reuters) - Most emerging Asian currencies traded flat to marginally easier on Friday as the dollar gained on the passage of a bill to temporarily extend U.S. government funding, raising investors' optimism that a tax reform bill would also pass.

The U.S. Congress passed legislation funding the government through Dec. 22, averting a shutdown of agencies that would have been triggered at midnight Friday. Congress and President Trump will now have to come up with a deal to keep the government operating beyond Dec. 22.

The dollar index, which gauges the greenback against a basket of six major rivals, was steady on the day and up 1 percent for the week.

 

"We are expecting seasonal U.S. dollar liquidity tightening due to reduced liquidity over the holiday season. That should feedback towards a firmer dollar and hence softer Asian FX," said Peter Chia, FX strategist for United Overseas Bank in Singapore.

Investors were keeping a close watch for U.S. non-farm payrolls data due later in the day.

Their focus was also on how many more interest rate hikes to expect in 2018, as the Federal Reserve funds futures were pricing in a rate hike at the central bank's Dec. 12-13 meeting.

China's yuan and the Thai baht led declines among emerging Asia currencies. Both lost one percent, although the baht was on track to post its first weekly gain in six.

The yuan remained little changed by data that showed the country's exports and imports unexpectedly accelerated last month after slowing in October.

The Singapore dollar, the Malaysian ringgit and Indonesia's rupiah all traded flat, while the Philippine peso and the Indian rupee inched up 0.3 percent and 0.1 percent, respectively.

"All the bad news about the peso is probably already in the price. Naturally, we can expect opportunistic investors coming in to pick up the peso which has not participated in the Asian FX rally this year," said Chia.

Christopher Wong, an FX strategist with Malayan Banking Berhad, attributed the Indian rupee's gain to investor expectations of good result for Prime Minister Narendra Modi's ruling party in the upcoming Gujarat state elections.

"We believe the BJP's NDA coalition is likely to remain in power in the state on the back of the popularity of PM Modi and prudent policies, but we still expect to see some volatility as counting will likely to go on till Dec. 18 or so," Wong said.

CHINA'S YUAN

The Chinese yuan inched lower against the dollar on Friday, reflecting the greenback's strength in global markets.

The yuan, which is set to finish the week on a flat note, was the biggest loser among emerging Asian currencies for the day.

Prior to the market opening on Friday, the People's Bank of China (PBOC) set the midpoint rate lower for the 10th straight day at 6.6218 per dollar, weaker than the previous fix of 6.6195.

The yuan opened at 6.6180 per dollar and was changing hands at 6.6178 at midday, 38 pips weaker than the previous late session close.

(Reporting By Christina Martin in Bengaluru; Editing by Simon Cameron-Moore)