Asian currencies cautious

Asian currencies wobbled in cautious trade on Friday as Washington's decision to impose trade tariffs on metal imports from key allies revived the risk of a global trade war, prompting investors to more into safer assets. Canada, Mexico and the European Union swiftly responded with retaliatory tariffs on US imports after Commerce Secretary Wilbur Ross announced a 25 percent tariff on steel imports and 10 percent tariff on aluminium imports.
The dollar index which measures the greenback against six major rivals was up 0.2 percent to 94.183 at 0515 GMT. Most regional currencies softened, but the Taiwan dollar and the Indian rupee rose, with stronger-than-expected India quarterly growth data adding to bets of a rate hike in coming months.
The Thai baht was little changed after annual inflation growth came in at a 16-month highs, beating estimates and above the previous month's clip. The 1.49 percent rise, however, was within the central bank's 1-4 percent target inflation range, and analysts don't expect a rate hike in its next monthly meet. The Chinese yuan slipped and looked set to post a weekly loss for a third straight session. Data showed that China's manufacturing sector expanded at a steady pace in May as a pick up in production and domestic business offset a second month of declines in new export orders, a private survey showed on Friday.
Financial markets in Indonesia were closed for a local holiday. On Thursday, the rupiah had gained after a second rate hike by the central Bank on Wednesday. A Reuters poll showed that a third hike may be in the offing this year. The rupee rebounded after data released late on Thursday showed the Indian economy grew 7.7 percent year-on-year in January-March, its quickest pace in nearly two years driven by higher growth in manufacturing, the farm sector and construction.
"The positive economic outlook will help take the sting from recent political developments, including the latest by-election results," DBS Group Research said in a note. "Backed by strong growth, higher core inflation and a need to prioritise financial stability, we expect the Reserve Bank of India's monetary policy committee to sound hawkish and pre-emptively raise the repo rate by 25bp rate hike on 6 June."
But the note added that an aggressive hiking cycle is unlikely given the resolution of banks' bad assets is slow. The rupee was on track to log its biggest weekly gain since early April. Prior to the robust GDP data, most economists had expected a rise in August. The South Korean won climbed despite a mixed bag of economic data.
A private manufacturing survey showed that South Korea's factory activity contracted for the third month in a row in May, prompting companies to cut staff at the fastest pace in almost a decade. Meanwhile, government data showed that South Korea, a leading suppliers of smartphones, displays and cars, saw a sharp rebound in exports in May. The won looked set to snap two weeks of loss and post a weekly gain.