Most Asian currencies edge up

Most Asian currencies edged higher on Friday as traders squared dollar positions ahead of the release of US payroll data later in the day, and after the Federal Reserve's less hawkish tone this week propped up regional currencies. The dollar index, which tracks the greenback against a basket of six major peers, was little changed at 92.424.
The Fed held interest rates steady on Wednesday and expressed confidence that a recent quickening in inflation to near the central bank's target would be sustained, leaving it on track to raise borrowing costs in June. Christopher Wong, an FX strategist with Maybank, said he believes the Fed's slight revision on inflationary trends is to pre-empt market views that further CPI upticks are likely and also that Fed will tolerate inflation temporarily overshooting the 2 percent symmetric objective.
"Temporary deviation is not likely to trigger the Fed to quicken its pace of monetary tightening. A gradual pace of rate increases remains the game plan for the Fed," Wong said. Traders were also closely watching trade talks between the US and China, though breakthrough deal is viewed as highly unlikely. Treasury Secretary Steven Mnuchin told media on Friday that the US trade delegation has been having very good conversations.
The Taiwan dollar rose more than 0.25 percent after touching a four-month low in the previous day. It also led regional currencies' gains against the dollar on Friday. The Philippine peso edged up after consumer prices accelerated in April at their fastest pace in at least five years, raising the prospect the central bank may need to tighten monetary policy as soon as next week.
China's yuan inched up after a firmer official fixing by the People's Bank of China (PBOC), however it was on course for its third straight weekly loss. But the market focus was clearly on Friday's employment report for April for further indications of the strength of the US labour market and inflation pressures.
"Even if we get better labour market data tonight, it is unlikely to provide much support to the dollar as the FOMC has already indicated in its latest FOMC meeting it is willing to tolerate an overshoot in its 'symmetric' inflation target," said a MUFG bank report. Outside Asia, Argentina's peso, which has been among the worst hit emerging market currencies during the past couple of months on rising US yields, tumbled to a record low.
The currency has been hit by a lack of investor confidence in Latin America's No. 3 economy, which has been blighted by one of the world's highest inflation rates. Maybank's Wong said the falls in Argentina's peso will have minimal impact on Asian currencies. The Malaysian ringgit was slightly lower at 3.932 per dollar.
Malaysia's exports rebounded in March. However, election risks loomed and reined in the currency. Chang Wei Liang, FX strategist at Mizuho Bank said the May 9 election is shaping up to be a nail-biter. "If BN unexpectedly loses its majority, we see prospects of heavy foreign bond and equity outflows, which are likely to trigger sharp MYR losses," Chang said.
"Given the asymmetry in possible post-election outcomes, we favour steering clear of the ringgit into elections." Malaysia's main opposition bloc is making gains and will likely win the popular vote, but Prime Minister Najib Razak is expected to retain power, according to a survey by pollster Merdeka Center.