By Sumanta Dey
BENGALURU (Reuters) - The outlook for major Asian currencies has stayed remarkably stable, according to a Reuters poll of strategists, despite the Japanese yen's explosive rally and with forecasts hinging on U.S. central bank policy expectations.
China's yuan is forecast to weaken slightly against the dollar over the coming year, while the Indian rupee and South Korean won are expected to slip a bit as well, views that haven't changed much since the start of the year.
But where each currency goes depends more on the timing of the next U.S. Federal Reserve rate hike, currently tipped for June, than on the trajectory of domestic monetary policy.
Pressure on the yuan has ebbed in the past few months on views the Fed may raise rates more gradually this year, which has held back the dollar, and as the People's Bank of China (PBoC) continues to clamp down on financial market speculation.
"While China's economy appeared to have stabilised lately, worries over longer term structural problems have not gone away," said Philip Wee, currency strategist at DBS in Singapore.
"There is incentive for China to not only keep the yuan stable, but also keep the spread between the onshore CNY and offshore CNH narrow."
The yuan, also called the renminbi, is traded both within China and outside, mostly in Hong Kong, where it is free of the PBoC's restrictions that stipulate the currency can move only within 2 percent of its daily mid-point fixing on either side.
In January, when China roiled global markets by allowing the yuan to slide sharply, speculators piled on bets that another devaluation was imminent.
That sent the spread between the offshore and onshore rates to its widest in many years, but it has narrowed since, especially after the PBoC allowed the yuan to trade both ways.
The consensus from over 50 currency strategists polled April 28 - May 4 is the yuan will likely trade at 6.50 by end-May, near Wednesday's 6.497, easing steadily to 6.65 by end-October and 6.72 by end-April 2017.
While that 12-month consensus is still about 3 percent lower than the current rate, analysts have held on to that view for three monthly polls now, suggesting forecasters mostly think a steady depreciation is more likely rather than a sharp fall.
The most pessimistic call was 7.60 in a year, similar to last month's poll.
The PBoC is expected to ease policy further this year in an effort to boost growth and that is likely to drag the yuan lower.
The dollar's fortunes, however, will be key.
While a Fed hike in June is still the main call for a majority of economists polled by Reuters, their conviction appears to be wavering. Whether or not the economy picks up from a sharp slowdown in the first quarter will matter a great deal.
Still, the long view is that the dollar will rise modestly through the coming year, especially as almost every other major central bank eases policy to combat weak inflation and boost growth. The Reserve Bank of Australia was the latest major central bank to do so, unexpectedly cutting its cash rate to a record low of 1.75 percent this week.
The Indian rupee is also forecast to weaken to 68.00 per dollar in six months, and then hold steady until end-April next year.
Growth in Asia's third largest economy will remain one the fastest in the world this year, economists predict, and with inflation in control, they expect the Reserve Bank of India to cut its lending rate in the last quarter of 2016.
The South Korean won will likely fall to 1190 in a year, 3 percent down from Wednesday's rate of 1154 and similar to expectations last month.
(For other stories from the global FX poll:)
(Additional reporting and polling by Shaloo Shrivastava; Editing by Ross Finley and Sam Holmes)