Asia currencies subdued ahead of Fed meet; Taiwan dollar edges up

By Ambar Warrick

(Reuters) - Most Asian currencies softened versus the dollar on Monday, marking a slow start to a potentially tense week amid caution ahead of a key U.S. Federal meeting.

Markets are bracing for Federal Reserve Chair Jerome Powell's first monetary policy meeting on Tuesday and a widely expected 25 basis point rate hike. The key focus is, however on whether policy makers forecast four rate hikes this year, instead of the three projected earlier.

"Consensus suggests the hurdle is high for the Fed to shift to four dots, but markets are on guard and with good reason," said Stephen Innes, head of trading, Asia Pacific, Oanda.

"While a March rate hike is a foregone conclusion, many Fed policymakers have upgraded their growth outlook for 2018."

Recent data supports economic optimism, such as U.S. industrial production that surged in February, boosted by strong increases in output at factories and mines.

While this has underpinned the dollar, the greenback continues to be pressured by concerns U.S. trade tariffs could hurt the global economy. It was down about 0.2 percent against the Japanese yen on Monday.

REGIONAL CURRENCIES

The South Korean won shed about 0.5 percent and fell to a near 2-week low. The country is in discussions with the United States over amendments to an existing bilateral free trade agreement, known as KORUS.

The Philippine peso also fell, clocking its worst intraday session in nearly 3 weeks. A current account deficit in the country has weighed heavily on the peso, which ranks among the worst performing regionals for the year.

The Singapore dollar and the Thai baht were also lower.

TAIWAN DOLLAR

However, the Taiwan dollar rose about 0.2 percent to the dollar. The currency has been underpinned by strong economic fundamentals, and is considered to be undervalued, as opposed to its regional peers.

Taiwan's export orders likely grew at a much slower pace in February than the previous month, but the softening was likely due to the timing of the Lunar New Year holidays, not a sudden weakening in global demand, a Reuters poll showed.

U.S. President Donald Trump on Friday signed legislation that encourages the United States to send senior officials to Taiwan to meet Taiwanese counterparts and vice versa, angering China, which views the self-ruled island as a wayward province.

(Reporting by Ambar Warrick in Bengaluru; Editing by Himani Sarkar)