By Ambar Warrick
(Reuters) - Most emerging Asian currencies on Friday slipped against the dollar, which firmed overnight, as many investors refrained from taking positions ahead of a Federal Reserve meeting next week that will set the tone for U.S. fiscal policy in 2018.
The dollar's advance was largely capped by jittery market participants following a turbulent week of trade tensions and shake-ups in the U.S. government.
Ahead of the Fed meeting, "we expect the USD to remain supported. While a rate hike has been priced in for the upcoming meeting, much uncertainty remains on whether the dots plot will be changed," said Christopher Wong, a Singapore-based FX strategist with Maybank.
However, the dollar softened against the yen after the Washington Post reported that President Donald Trump had decided to remove H.R. McMaster as his national security adviser.
Among emerging Asian units, the South Korean won led declines, falling about 0.3 percent. However, the currency was still on track to end the week higher, as investors remained positive about easing political tensions in the Korean Peninsula.
The Chinese yuan fell against the dollar after there was a weaker midpoint fixing. While the yuan has firmed recently on the general dollar weakness - and was on track for a small gain this week - it has come under pressure following scrutiny of China's trade practices by the United States.
The head of the influential U.S. Chamber of Commerce warned the Trump administration that unilateral tariffs on Chinese goods could lead to a destructive trade war.
This followed a Reuters report that Trump was considering tariffs on up to $60 billion worth of select Chinese imports.
INDONESIAN RUPIAH
The Indonesian rupiah fell slightly against the dollar, but was on track to end the week slightly higher.
The rupiah is among the few currencies to weaken against the dollar this year. It has been dented by recent trade deficits.
"As fiscal deficit also faces increasing pressure amid higher electricity and fuel subsidies, the danger of twin deficits could keep investors at bay," Mizuho said in a note.
"Volatility around the rupiah is likely to remain in place and as a result, it could underperform compared to other regional currencies," it said.
TAIWAN DOLLAR
The Taiwan dollar was the biggest gainer on Friday, rising about 0.1 percent to a more than 3-week high against the dollar.
Central bank governor Yang Chin-long said the bank would take a "flexible approach to manage floating exchange rate" ahead of its rate- setting meeting on March 22.
Wong of Maybank added that the Taiwan dollar's recent strength might have been spurred by the governor's comments. He said that the currency's lower real effective exchange rate implies it is not overvalued compared with peers.
The Taiwan dollar was on track for its best week since late January.
(Reporting by Ambar Warrick in Bengaluru; Editing by Richard Borsuk)
Disclaimer: No Business Standard Journalist was involved in creation of this content
