Asian currencies fall as dollar recovers, China trade issues back in focus

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BENGALURU (Aug 29): Asian currencies weakened on Wednesday as investors booked profits on gains made earlier this week, but investors remain cautious as the Sino-US trade dispute looks set to dominate headlines in the week ahead.

Currencies in the region found support after an agreement between the United States and Mexico to overhaul NAFTA supported risk appetite, but analysts doubt a similar outcome for ties between Washington and Beijing.

Focus is now shifting to the Sept 5 deadline for public comment on US President Donald Trump's increased tariffs on US$200 billion of Chinese goods.

"A 'win' for NAFTA (regardless of the details) provides US a stronger position to come down harder on China," noted Saktiandi Supaat, head of FX research at Maybank.

"The lead up to US trade decision warrants a cautious take on risk sentiment. The dollar may see some near term support as a result."

The dollar recovered against Asian currencies on Wednesday after dipping to a four-week low overnight.

The Thai baht dropped 0.5% on dollar short covering by traders and higher demand for the greenback from importers.

The Indian rupee hit a record low against the dollar on Wednesday, pulled down by a rise in US Treasury yields and a strong month-end dollar demand back home. The Reserve Bank of India likely sold dollars, though the force was mild, according to two senior forex officials at state-run banks.

China's yuan also weakened, snapping a three-day winning streak, pulled lower by rising corporate demand for cheaper dollars.

The dollar index against a basket of six major currencies inched higher, after trading as low as 94.434 during the US session, its lowest since July 31.

"Although US dollar weakness may start to ease, we continue to see positive cues for EM Asian currencies from the RMB complex, risk sentiments and portfolio flows," noted Terence Wu, FX strategist at OCBC Bank in Singapore.  

Overseas investors have bought a net US$1.2 billion of Asian stocks so far this month, after their purchases of US$293 million in July, data from seven stock exchanges showed.

The following table shows rates for Asian currencies against the dollar at 0603 GMT.

Change as of 0603 GMT

Currency                Latest bid  Previous day    % move
Japan yen              111.150    111.18  +0.03
Sing dlr               1.365      1.3636  -0.12
Taiwan dlr             30.708     30.724  +0.05
Korean won             1110.700      1110  -0.06
Baht                   32.700      32.54  -0.49
Peso                   53.340     53.325  -0.03
Rupiah                 14640.000     14617  -0.16
Rupee                  70.455      70.10  -0.50
Ringgit                4.101       4.095  -0.15
Yuan                   6.819      6.8030  -0.24

Change so far in 2018

Currency               Latest bid   End 2017    % move
Japan yen              111.150    112.67  +1.37
Sing dlr               1.365      1.3373  -2.05
Taiwan dlr             30.708     29.848  -2.80
Korean won             1110.700   1070.50  -3.62
Baht                   32.700      32.58  -0.37
Peso                   53.340      49.93  -6.39
Rupiah                 14640.000     13565  -7.34
Rupee                  70.455      63.87  -9.35
Ringgit                4.101      4.0440  -1.39
Yuan                   6.819      6.5069  -4.58