Asia's emerging currencies edged higher on Thursday as Treasury yields retreated on signs of a deal to avert a US federal debt default, calming market fears ahead of key data that could signal when the Federal Reserve may start tapering.
Lower oil prices also helped prop up the currencies of Asia's oil importers such as South Korea, which alongside the Thai baht led the region with gains of up to 0.3%.
Stocks in South Korea and Taiwan both rose more than 1.5%, ending a week-long period of losses brought on by inflation fears and supply disruptions.
Politicians in Washington appeared close to a temporary deal that would avoid a shutdown of the US government and see an extension of the federal debt ceiling into December.
That left markets largely awaiting US employment data on Friday for a clue as to when the Fed may start to wind down its pandemic-era asset purchases, which could eat into demand for Asia's higher-yielding but riskier assets.
"A very strong number on all counts may see the market bring forward expectations of Fed rate hikes, which will be positive for the dollar and keep Asian currencies on the backfoot," Khoon Goh, ANZ's head of Asia research said.
In September, the Fed said it was likely to begin reducing its monthly bond purchases as soon as November.
Chinese markets, a big directional driver for Asia, will reopen on Friday after a week-long public holiday, raising liquidity, although fears of wider property market woes stemming from the Evergrande crisis could return to the fore.
"Chinese market sentiment will also be a crucial driver, and the restart of South-bound flows may lift Hong Kong equities and lift broader Asian sentiment," Wei-Liang Chang, an FX and credit strategist at DBS said.
Elsewhere, Indonesian shares edged 0.2% higher and the rupiah, which backs some of emerging markets highest-yielding debt, was flat.
Foreign exchange reserves in Southeast Asia's largest economy rose in September by about $2.1 billion to a record of $146.9 billion, the central bank said.
Friday will also see a meeting of India's central bank, where policymakers are widely expected to keep the repo rate unchanged to support recovering growth.
Highlights:
** Indonesian 10-year benchmark yields are up 1.9 basis points at 6.328%
** Thai consumer confidence rises in Sept over eased coronavirus curbs
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