Asian currencies fall as global bond yields rise; yuan slides

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(July 24): Emerging Asian currencies fell on Tuesday, as bond yields climbed globally and markets were impacted by speculation the Bank of Japan (BOJ) could modify its huge stimulus programme and by fears  United States interest rates would keep steadily rising. 

The Chinese yuan weakened the most, reaching its lowest level in over a year, as traders bet that monetary conditions in China would be eased further. 
Dampening sentiment in Asia was 10-year U.S. Treasury yields hitting a five-week high on expectations the Federal Reserve would persist with rate hikes this year, despite criticism from President Donald Trump.

Last week, Trump threatened to impose tariffs on all US$500 billion of Chinese exports to the United States unless Beijing agrees to major structural changes to its technology transfer, industrial subsidy and joint venture policies.

"Regional Asian forex weakness is being driven by a perceived easing bias by the People's Bank of China and an escalation in tit-for-tat trade measures,"  said Wei Liang Chang, an FX strategist at Mizuho Bank.

Indonesia's rupiah, which has weakened each of the past four sessions dropped by as much as 0.48%, reaching its lowest in more than 2-1/2 years.

The South Korean won and the Taiwan dollar both shed 0.2% against the dollar.

The Thai baht, Philippine perso and Indian rupee fell 0.1% each.

Chinese yuan

The yuan reversed Monday's gains to slide to its lowest since June 2017.

In an unexpected move, China's central bank said on Monday that it lent US$74.36 billion to financial institutions via its one-year medium-term lending facility (MLF), with rates unchanged.

Chang said markets were surprised by China's move, suggesting the People's Bank of China has tilted towards facilitating easier monetary conditions.

Chinese bond yields rose after China's cabinet said it will implement a more robust policy without resorting to strong stimulus, while cutting US$9.6 billion in tax on top of an initial goal of slashing taxes and fees by 1.1 trillion yuan this year.

The PBOC set the yuan midpoint rate CNY=PBOC at 6.7891 per dollar, its weakest since July 11, 2017. The fixing was 298 pips or 0.44% weaker than Monday's midpoint of 6.7593.

On Monday, China said it does not intend to devalue the yuan to help exports, after Washington said it was monitoring the currency's weakness amid the escalating bilateral trade row.
The following table shows rates for Asian currencies against the dollar at 0542 GMT.

Currency Latest bid Previous day Pct Move
Japan yen 111.280 111.33 +0.04
Sing dlr 1.366 1.3651 -0.05
Taiwan dlr 30.688 30.645 -0.14
Korean won 1135.100 1131.4 -0.33
Baht 33.460 33.43 -0.09
Peso 53.491 53.411 -0.15
Rupiah 14540.000 14485 -0.38
Rupee 68.940 68.86 -0.12
Ringgit 4.065 4.061 -0.10
Yuan 6.814 6.7855 -0.41

Change so far in 2018

Currency Latest bid End 2017 Pct Move
Japan yen 111.280 112.67 +1.25
Sing dlr 1.366 1.3373 -2.09
Taiwan dlr 30.688 29.848 -2.74
Korean won 1135.100 1070.50 -5.69
Baht 33.460 32.58 -2.63
Peso 53.491 49.977 -6.57
Rupiah 14540.000 13565 -6.71
Rupee 68.940 63.87 -7.35
Ringgit 4.065 4.0440 -0.52
Yuan 6.814 6.5069 -4.50