Asian Currencies Muted Before U.S. Payrolls, Indian Rupee Gains on Rate Hike

By Ambar Warrick Most Asian currencies treaded water on Friday as investors hunkered down ahead of key U.S. payrolls data, while the Indian rupee rose after the central bank hiked rates by more than expected.

The rupee rose 0.2% to 79.043, after the Reserve Bank of India (RBI) hiked rates by 50 basis points to 5.4%, and vowed more support to combat rampant inflation. Investors were expecting a hike of 35 basis points.

The hike is the RBI’s fourth such move this year, and comes as inflation surged to a two-year high in the South Asian country.

Most other Asian currencies were largely flat. China’s yuan was unchanged to the dollar at around 6.7460, while the Japanese yen fell 0.3%.

The USD/PHP jumped 0.5% to 55.230, after a bigger-than-expected rise in July inflation spurred rising bets of more interest rate hikes by the central bank.

Consumer price inflation in the Philippines stood at 6.4% in July, higher than expectations of 6.2%.

Focus now turns to upcoming U.S. nonfarm payrolls data, due later in the day. The figure is expected to have fallen substantially in July from the prior month, indicating some cooling in U.S. labor markets.

The U.S. dollar fell sharply on Thursday in anticipation of the reading, and was trading 0.2% higher on Friday. Dollar Index Futures also rose in a similar range.

Strength in the dollar has broadly weighed on Asian currencies this year, as investors penciled in more interest rate hikes by the Federal Reserve. Hawkish comments from some officials had also caused some outflows from regional currencies this week.

But most units were set to end the week largely unchanged, at least for now. U.S. payrolls data could change the trend later in the day.

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