Most emerging Asian currencies rose on Friday as risk appetite improved as Chinese stocks rallied for a second day and hopes that Greece's can reach a deal with its creditors in talks over the weekend. Despite the rise regional currencies were still set to post weekly losses.
The Malaysian ringgit advanced as local traders cut bearish bets and as oil and gas exporters sold dollars. The country's factory output in May rose more than expected. South Korea's won gained as offshore funds cut bearish bets. Markets go into the weekend uncertain whether Greece will be able to find a way out of its debt crisis. On Thursday, the government proposed new reform plans to its euro zone creditors to secure new money to avert bankruptcy. The government will seek a parliamentary approval on Friday.
Reassuringly, Chinese shares extended sharp rebounds after a Beijing took a series of steps to stabilise markets. But investors remained cautious over the long-term impact on the world's second largest economy from the recent plunge in stocks. "Support measures worked on China stocks. The rebound will sustain at least as long as the aggressive support measures are in place," said Amy Yuan Zhuang, a senior analyst at Nordea in Singapore.
"But for now, we maintain our cautious view on Asia FX though. Too much uncertainty," Zhuang said. China still faces bubbles in property and credit, while the US Federal Reserve is likely to raise interest rates this year, she added. Nordea has forecast US rates will rise in September. Kansas City Fed Bank President Esther George said on Thursday the US central bank may stumble into a "trap" if it continues waiting for more data to justify an initial interest rate increase. By contrast, Chicago Fed President Charles Evans on Thursday said he wants the Fed to wait until mid-2016 for the first rate hike.
Most emerging Asian currencies were on the course to see weekly losses, led by the won, as the recent Chinese stock rout and worries about Greece's debt crisis hurt risk sentiment. The won has fallen 0.6 percent against the dollar so far this week as foreign investors kept unloading Seoul shares . Foreigners were set to become net sellers for a sixth consecutive session, dumping a combined net 1.2 trillion won ($1.1 billion) during the period, the Korea Exchange data showed. South Korea's central bank also slashed its economic growth forecast on Thursday.
The ringgit has eased 0.2 percent throughout the week despite corruption allegations around Malaysia's Prime Minister Najib Razak and debt-ridden state fund 1MDB. The central bank was spotted intervening to prevent the political tensions from further hitting the worst-performing Asian currency so far this year, traders said. Thailand's baht has slid 0.4 percent so far this week on stock outflows.
The Taiwan dollar also lost 0.4 percent as the island's stocks lost ground with heavy foreign selling. Local financial markets were closed on Friday due to a typhoon. The Singapore dollar and the Philippine peso have eased 0.2 percent, respectively. Indonesia's rupiah bucked the weekly regional losses with a 0.1 percent gain on bond inflows. The country sold 15 trillion rupiah ($1.1 billion) worth of conventional bonds at an auction on Tuesday, above an indicative target of 10 trillion rupiah, the finance ministry said.
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