Emerging Asian currencies were subdued on Friday as investors stayed cautious ahead of US employment data likely to help determine the Federal Reserve's path on monetary policy. Expectations of a July interest rate cut have risen lately due to a raft of weak US economic data, and Friday's non-farm payrolls figures for June could cement or reduce chances of easing. ANZ Research said it was sceptical that the Fed would act from one data point alone.
However, it added that "if the numbers confirm a loss of momentum in the labour market or are extremely weak, the focus will return immediately to the potential for a 50bps cut." The Indian rupee, the biggest mover in the region, weakened the most in two weeks ahead of country's federal budget due later in the day. The budget, the first since Prime Minister Narendra Modi secured a second term by a landslide, is likely to cut taxes on business and raise spending in a bid to shore up consumption and faltering economic growth.
The Korean won slid 0.2%, in tandem with the local share benchmark which dropped after Samsung Electronics' second-quarter profit guidance added to investor concerns over the country's memory chip exports. The forecast further underlines the strain the Sino-US trade war is putting on trade-dependent South Korea. The won was headed for a weekly decline of 1.4%, which would be its biggest since mid-May. The Thai baht dipped 0.2%, putting it on track to have a five-week winning streak snapped.
The currency has strongly outperformed its peers this year but came under pressure this week as the Bank of Thailand (BOT) expressed worries about the baht's strength. Slowing economic growth and contraction in exports has also sparked speculation that the Thai central bank could cut interest rates. On Wednesday, the BOT said it is not closing the door to easing monetary policy.
Investors scaled back bearish bets on most Asian currencies, a Reuters poll showed on Thursday, with risk appetites returning to markets after the United States and China agreed to restart trade talks. Bearish bets on the Chinese yuan more than halved, while markets turned bullish on the Indian rupee and Philippine peso.