Asia FX on track for weekly gains

Some Asian currencies edged higher on Friday, with the dollar weighed down by caution ahead of US jobs data, while the offshore Chinese yuan slipped back after a record two-day rally. The Malaysian ringgit and the Indonesian rupiah gained 0.2 percent, and the Thai baht rose 0.1 percent in Friday's onshore trade.
Most Asian currencies were on track for weekly gains, after the rally in the offshore Chinese yuan helped trigger the unwinding of bullish bets on the dollar. Analysts said emerging Asian currencies could hold firm for now, with the dollar seen at risk of a further pull-back in the wake of its rally in the past couple of months. "There's a sense that the long dollar trade is a bit stretched and the dollar has already reflected a lot of the reflation optimism," said Sim Moh Siong, FX strategist for Bank of Singapore. "I imagine that at this stage it would take very strong data to bring back the strong dollar trend," Sim said, referring to the near-term outlook.
The dollar might slip if US jobs data due later on Friday shows that nonfarm payrolls increased by around 150,000 to 200,000 in December, Sim added. The median market forecast is an increase of 178,000. Against a basket of six major currencies, the dollar was trading at 101.75, having hit a three-week low of 101.30 on Thursday. The dollar has rallied broadly since early November, as US bond yields jumped on expectations that President-elect Donald Trump's proposals for infrastructure spending and tax cuts will boost US economic growth and inflation.
The offshore yuan slipped back on Friday to 6.8380 per dollar, pulling back from a two-month high of 6.7833 set on Thursday. The offshore yuan had risen more than 2 percent on Wednesday and Thursday combined, its biggest two-day gain on record, driven predominantly by a jump in yuan borrowing costs offshore and tighter liquidity. Traders and analysts suspect that Chinese policymakers have sought to prevent the yuan from weakening to the 7-per-dollar level ahead of Trump's inauguration on January 20. In onshore trade the yuan erased the previous day's gains, but was on track for a slight weekly gain of about 0.1 percent.