MANILA, Jan 27 (Reuters): Emerging Asian currencies pared early strength on Friday as the greenback gained footing ahead of US inflation data, while overnight data highlighting a resilient U.S. economy boosted regional shares to a near nine-month high.
The Philippine peso shed gains to trade flat, while the Malaysian ringgit edged 0.2% higher, owing to firmer crude oil prices.
Both the currencies were poised for their third weekly climb, with the latter rising nearly 4% year-to-date, just behind the top-performing Thai baht.
On the other hand, the Pakistani rupee's steep fall against the dollar over the previous two days showed signs of steadying on Friday on hopes of a bail-out package by the International Monetary Fund.
MSCI's broadest index of Asia-Pacific shares outside Japan rose as much as 0.55% to hit an almost nine-month high, with Jakarta shares leading with a 0.8% rise.
US GDP data led to "optimism that the Federal Reserve may be able to engineer a soft landing," aiding risk sentiment in Asian markets, according to OCBC analysts.
Investors await the US personal consumption expenditures (PCE) data, the Fed's preferred inflation measure, which could build the case for a 25-basis-point rate hike by the central bank next week.
The dollar rose 0.2% against a basket of peers, but was still on course for a marginal decline this week.
The baht, which has emerged as a top beneficiary of China's abrupt dismantling of its COVID-19 curbs, slipped 0.4% and was set to snap a five-week winning streak. Indonesia's rupiah fell 0.2%, after making strong gains earlier in the week, setting it up for a third straight weekly gain.
A Reuters poll showed investors were bullish on all nine Asian emerging currencies for the first time in nearly two years, as a fizzling U.S. dollar rally and China's pivot from its strict Covid-19 curbs boosted appetite for riskier assets.
"The rebuild in FX reserves bolsters the constructive outlook on Asia FX amid the China reopening story, but we are hesitant to chase it as a lot is in the price," TD Securities analysts said in a note.
After a slew of rate hikes in 2022, more central banks in Asia dialled back on their policy-tightening rhetoric last week, on signs of peak inflation in most regional economies, except the Philippines.
The Malaysian central bank stood pat on interest rates, Indonesia signalled an early end to its cycle and Thailand's central bank hinted at measured tightening ahead.
Seoul shares gained 0.6% while those in Thailand and Singapore rose 0.5% each. Indian stocks dropped nearly 1.6%, dragged lower by financials on risk aversion due to Hindenburg's report on the books of Adani Group companies. - Reuters
