Asia FX steps back before Fed minutes; yuan gains after long holiday

[SINGAPORE] Most emerging Asian currencies dipped on Thursday as traders booked profits from recent gains and waited on minutes of the Federal Reserve's last policy meeting for any clues on the timing of a US interest rate hike.

The Chinese yuan, however, rose as the central bank set a firmer midpoint after a week-long holiday and unveiled reforms steps to encourage the use of the yuan to close more trade settlements.

Indonesia's rupiah led regional losses as it came under renewed pressure from local importers' demand for dollars.

The Singapore dollar eased as traders cut bullish bets on the currency as stocks weakened and ahead of the central bank policy announcement on Oct 14. The Monetary Authority of Singapore was expected to ease its policy to prop up growth and inflation, a Reuters poll showed.

"Asian currencies were seeing profit-taking. They are unlikely to return to recent highs unless there are fresh positive factors such as signs of stabilisation in China's economy," said Jeong My-young, Samsung Future's research head in Seoul.

Most regional units have risen so far this week as disappointing September US jobs data on Oct 2 prompted markets to scale back expectations of an imminent interest rate hike by the Fed.

Investors were focused on the Fed's minutes of its September meeting due later Thursday for clues on whether the US central bank will start increasing interest rates before year-end.

Last month, the Fed held off on raising borrowing costs, citing concerns about global risks and low inflation.

The rupiah and the Malaysian ringgit led regional gains for the week, as investors rushed to unwind bearish bets on those worst-performing regional currencies so far this year.

RUPIAH

The rupiah earlier rose as much as 0.7 per cent to 13,700 per dollar, which was Wednesday's high and the strongest since Aug 12.

The Indonesian currency turned lower as interbank speculators booked profits from its recent gain. It had jumped 6.1 per cent against the dollar in the first three days of the week.

Local importers also bought the dollar for payments on dips, putting pressure on the rupiah.

Still, higher Indonesian stocks and government bond prices limited the rupiah's downside.

Jakarta shares gained 0.3 per cent after Indonesia on Wednesday unveiled another round of economic stimulus measures including a cut in energy prices.

Foreign investors were net buyers in the domestic stock markets in the previous four consecutive sessions, absorbing a combined net 1.5 trillion rupiah (S$153 million), according to Thomson Reuters data.

REUTERS