* Weak China factory readings outweigh Fed's dovish stance
* India's pre-election budget in focus
* Rupiah gains; while rest of Asia FX weakens
(Adds text, updates prices)
By Nikhil Nainan
Feb 1 (Reuters) - Most Asian currencies softened on Friday
as bleak China factory readings knocked back investor sentiment,
which had been improving on signs of progress in Sino-U.S. trade
talks and a shift by the U.S. central bank to a more cautious
China's factory activity shrank by the most in almost three
years in January as new orders slumped further and output fell,
a private survey showed, reinforcing fears a slowdown in the
world's second-largest economy is deepening.
The data overshadowed apparent progress on trade talks after
U.S. President Donald Trump said on Thursday he will meet with
Chinese President Xi Jinping soon to try to seal a comprehensive
trade deal as the top U.S. negotiator reported "substantial
progress" in two days of high-level talks.
China's yuan weakened 0.4 percent on Friday after
the data, though it still looked set for a second week of gains
against the dollar.
The dollar index, a gauge of its strength versus six major
peers was trading roughly unchanged, but set to fall for
Thailand's baht dropped 0.3 percent to 31.33
against the dollar. Data on Thursday showed exports contracted
The baht is on track for a 10th straight week of gains and
is the region's best performing currency. The country's central
bank is set to meet late next week.
"Authorities have more reasons to be wary about the ongoing
currency strength while exports are poised to falter," said ING
in a note on Thursday after the data was published.
Meanwhile, the rupiah rose 0.2 percent to 13,940,
with the unit set to gain nearly 1 percent for the week.
Markets in Malaysia were closed for a holiday.
INDIA ON BUDGET WATCH
The rupee was slightly weaker at 71.125, with
investors awaiting ruling party spending pledges ahead of a
general election in May that may have lead to the country's
fiscal deficit expanding.
"The markets will be looking out for what the budget holds
whether or not there is going to be any big spending promises
that will lead to a larger than expected fiscal deficit, if that
happens, then that will be a negative for the rupee," said Khoon
Goh, ANZ's Head of Asia Research.
With the country's opposition gaining ground, the government
will likely raise spending.
Along with a shortfall in tax collections, that will push
the fiscal deficit up to the equivalent of 3.5 percent of gross
domestic product for the year ending in March, overshooting a
previous 3.3 percent target, according to one of the sources
with direct knowledge of budget discussions.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0340 GMT
Currency Latest bid Previous day Pct Move
Japan yen 108.910 108.87 -0.04
Sing dlr 1.348 1.3452 -0.19
Taiwan dlr 30.725 30.740 +0.05
Korean won 1116.700 1112.7 -0.36
Baht 31.330 31.23 -0.32
Peso 52.230 52.1 -0.25
Rupiah 13940.000 13970 +0.22
Rupee 71.125 71.08 -0.07
Yuan 6.728 6.6995 -0.42
Change so far in 2019
Currency Latest bid End 2018
Japan yen 108.910 109.56 +0.60
Sing dlr 1.348 1.3627 +1.11
Taiwan dlr 30.725 30.733 +0.03
Korean won 1116.700 1115.70 -0.09
Baht 31.330 32.55 +3.89
Peso 52.230 52.47 +0.46
Rupiah 13940.000 14375 +3.12
Ringgit 4.094 4.1300 +0.88
Yuan 6.728 6.8730 +2.16
(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Kim