Most emerging Asian currencies rose on Friday and were on track for weekly gains after the dollar lost ground as the European Central Bank unveiled monetary stimulus that was less bold than many expected. However, some of the early gains by regional currencies were cut ahead of key US jobs data due later in the day. A solid reading may cement prospects of an interest rate hike by the Federal Reserve in less than two weeks.
The ECB on Thursday cut its deposit rate deeper into negative territory and extended its asset purchases by six months, widely anticipated moves that some investors considered the bare minimum. The decision helped the euro enjoy the largest daily surge in nearly seven years, pushing down the dollar broadly on Thursday. Emerging Asian currencies benefited as the dollar's weakness caused investors to cut the greenback holdings.
Still, caution grew as investors awaited November US nonfarm payrolls data at 1330 GMT. Analysts expect the payrolls to have grown 200,000 in November, according to a Reuters poll. The dollar on Friday in Asia rose against a basket of six major currencies. "This is largely a positioning move as the market got caught long and wrong dollars," said Khoon Goh, senior FX strategist for ANZ in Singapore, referring to Friday's rise in emerging Asian currencies. "A strong (US jobs) print will see dollar long positions getting reinstated, sending Asian currencies lower." Goh said any number above 200,000 will spur such moves.
Federal Reserve Chair Janet Yellen said on Thursday the US economy needs to add fewer than 100,000 jobs a month to cover new entrants to the workforce, setting an implicit floor for the jobs growth policymakers want to see. Yellen also said the United States may be "close to the point at which we should be raising" a benchmark interest rate that has been held near zero since the onset of the financial crisis seven years ago.
The Fed policymakers meet on December 15-16 and the US central bank is widely expected to raise borrowing costs for the first time in nearly a decade. The Malaysian ringgit was on course for the biggest weekly gain. So far this week, the ringgit has risen 1.3 percent against the dollar, and was on course for a third straight weekly appreciation. "The worst of MYR underperformance is behind us - amidst a backdrop of reduced political noise, we expect the current account surplus to improve and resident outflows to slow," Barclays said in its emerging markets weekly note.
Malaysia's exports and trade surplus in October were better than expected, data showed on Friday. The ringgit is the worst-performing Asian currency this year on sliding oil prices as well as allegations of graft surrounding Prime Minister Najib Razak and state fund 1Malaysia Development Berhad (1MDB). The Singapore dollar has advanced 1.2 percent so far this week as a weak US dollar prompted investors to unwind bearish bets. Taiwan's dollar has gained 0.4 percent so far this week, while the Thai baht and the Philippine peso have edged up 0.1 percent.
China's yuan, up marginally on Friday, faced a possible fifth straight week of depreciation. That would be the currency's longest such losing streak since February 2014, according to Thomson Reuters data. South Korea's won ended the week down 0.3 percent as foreign investors continued to sell Seoul shares.
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