Asian currencies trapped in tight range

Emerging Asian currencies were stuck in a tight range on Friday as investors fretted whether a new US law backing Hong Kong protesters could derail trade negotiations between Washington and Beijing. US President Donald Trump on Wednesday signed into law Congressional legislation backing the protesters, prompting Beijing to warn of "firm counter measures".

China's yuan eked out marginal gains against the dollar in thin trade, while the Thai baht was largely flat ahead of the release of October trade data.

The South Korean won weakened 0.2% to the dollar, after the central bank left interest rates unchanged at 1.25%, as expected, and trimmed its growth and inflation forecasts for the year, cementing a case for more policy easing next year.

"A cut to 1.0% would start to raise questions about whether the central bank is approaching the limits of what can be achieved through conventional policy," Alex Holmes, Asia economist at Capital Economics, said in a note.

Market focus will now shift to China's factory activity data, due on Saturday, which is expected to have contracted for a seventh straight month in November amid sluggish domestic demand, a Reuters poll showed.

The Indonesian rupiah eased 0.2%, while the Malaysian ringgit ticked higher but was poised for a third straight weekly fall.

The Indian rupee dipped 0.2% ahead of the release of economic growth figures for the July-September quarter.

A Reuters poll showed the economy probably expanded at its weakest pace in more than six years in the last quarter, hurt by a slowdown in consumer demand and private investment.

The peso strengthened as much as 0.2% before erasing gains, but remained on track for a weekly gain of 0.2%, making it the region's top performing currency for the week.

Earlier this week, local media quoted Bangko Sentral ng Pilipinas Governor Benjamin Diokno as saying another rate cut was still possible during the year's last policy meeting in December.

The economy clocked surprisingly stronger growth in the third quarter, giving the central bank more leeway to stand pat on interest rate cuts after a 75 basis point cut in total this year.

"Should inflation data for November defy market expectations and point to a marked slowdown, that could prompt the central bank to resume its monetary easing at its next policy decision," said Han Tan, a market analyst at FXTM.

Rising real yields and a narrowing trade deficit have largely propped up the peso so far this quarter, Tan added.