EMERGING MARKETS-Asian currencies rally for sixth-straight week as US fiscal concerns mount

By Rishav Chatterjee

May 23 (Reuters) - Emerging Asian currencies rose on Friday, on track for a sixth consecutive weekly gain, as fading appetite for U.S. assets due to concerns over the country's fiscal health lifted emerging assets including Malaysia's ringgit and Indonesia's rupiah.

The Philippine peso PHP=, Singapore dollar SGD=, the Taiwan dollar TWD=TP and the rupiah IDR= gained between 0.1% and 0.5% on Friday, while the ringgit MYR= rose 0.5%.

The MSCI Emerging Market Currency Index .MIEM00000CUS added more than 0.2% this week, building on five prior weeks of gains and matching a streak last seen from July to September 2024.

Investor caution lingered as markets continued to digest the implications of President Donald Trump’s tax cut bill, which is projected to swell the U.S. debt burden by $3.8 trillion over the next decade.

The bill, passed by a single-vote margin in the House of Representatives, now heads to the Senate, where several members said they would seek substantial changes over what is likely to be weeks of debate.

U.S. debt concerns were amplified after Moody's Ratings downgraded the country's top-tier credit rating last week, shaking a brief period of relative calm following last month’s tariff-driven volatility.

The U.S. dollar weakened 0.3% on Friday and was on track for its first weekly decline in five weeks.

"The weaker U.S. dollar creates an opportunity for Asian central banks to cut rates," said Samuel Tse, senior economist at DBS.

Bank Indonesia eased its benchmark interest rates this week, while the Malaysian central bank stood pat earlier this month.

The ringgit remained a standout, headed for its seventh weekly gain in eight weeks. The Singapore dollar was up 1.2% for the week, while the rupiah and the South Korean won KRW=KFTC also posted weekly gains.

The Taiwan dollar TWD=TP extended its run to an eighth straight week, following remarks by the central bank that it had deliberately allowed the currency to rally in early May — resulting in its sharpest one-day appreciation since the 1980s.

The won has rallied since South Korea's deputy finance minister met with the U.S. Treasury Department's assistant secretary for international finance to discuss the dollar/won market on May 5.

The Taiwan central bank's "statement that the Taiwan dollar rally in early May was an intentional strategy as well as media stories that the South Korean won's direction was being touched on in recent trade talks have set the USD-Asians on a path lower," said Fiona Lim, senior FX strategist with Maybank.

In contrast, the Philippine peso had the smallest gains among its Southeast Asian peers during the week, held back by rising political instability.

President Ferdinand Marcos Jr. asked for the resignation of his entire Cabinet, seeking to reset his administration after a weak Senate election showing by his allies.

The Philippines' central bank governor also flagged there was room to cut interest rates by 25 basis points twice more this year.

Asian shares edged higher on Friday as buyers returned to the battered U.S. Treasury market, offering some relief to risk sentiment after a volatile week.

Equities in Manila .PSI, Jakarta .JKSE and Kuala Lumpur .KLSE added 0.9%, 0.5% and 0.6% respectively.

HIGHLIGHTS:

Singapore sees technical recession risk after Q1 contraction

Indonesia's Q1 current account deficit narrows to 0.1% of GDP