Asian FX hobbled by absence of catalysts, lingering trade worries

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(July 10): Most Asian currencies struggled for traction on Tuesday, as the backdrop of an U.S.-driven international trade war and the absence of positive catalysts kept investor sentiment largely in check.

The Philippine peso, which has been hovering around 12-year lows, came under more strain as the nation's trade deficit widened further in May. 
 
"Trade war risk is likely to linger in the background, as countries start to introduce measures to prepare for tariffs staying for a potentially longer-than-expected period," Mizuho said in a note. 

The dollar's index against a basket of six major currencies hovered around June's lows, up just a touch on the day at 94.181, mainly capped by disappointing wages growth in an otherwise solid U.S. payrolls report on Friday. 

The Chinese yuan pushed higher for the second day, up 0.1% to 6.605 on the dollar, helped by the combination of a firmer official yuan fixing, a broadly softer greenback and some easing of Sino-U.S. trade tensions.

While both China and the United States hit each other's goods with tariffs on Friday, the focus now is on whether the dispute would ratchet up further or if officials in Beijing and Washington will find a way to ease off the tense trade relations.

Data earlier in the day showed China's producer inflation, a gauge of industrial profitability, rose by a stronger-than-expected 4.7% in June. The worry is that an uptick in factory-gate prices could put more pressure on the country's exporters as trade dispute with the U.S. prolongs.

The Indian rupee eased 0.1% to 68.790. 

A Reuters poll showed inflation is likely to rise to a near two-year high in June, a development that would strengthen calls for more monetary tightening by the central bank.

Deficit woes hit Philippine peso

The Philippine peso gave up 0.2% to 53.483, after data showed the country's trade deficit widened in May to a five-month high as exports shrunk.

The Import-driven trade gap is expected to worsen the country's current account deficit this year, and cast further pressure on the peso, which is one of Asia's worst performers so far this year.

"The deterioration in the external position in the Philippines is one of the key causes for the peso weakness and with no signs of any improvement in the trade balance, I expect the peso to remain under pressure," said Khoon Goh, ANZ's head of Asia research. 

Goh tips the peso to weaken to 54 on the dollar by year-end.

The Philippine central bank expects a current account deficit of US$3.1 billion at the end of the year, wider than an earlier forecast of US$700 million, and higher than the previous year's US$2.52 billion gap.
    
Ringgit outperforms before c.bank meet 

The Malaysian ringgit rose to 4.009 per dollar, a day ahead of Bank Negara Malaysia's policy meeting, where interest rates are expected to remain unchanged.

As a net oil exporter, rising prices "will benefit exports for Malaysia and hence that's helped to provide an additional kick for the ringgit today," ANZ's Goh said.

Analysts say that with the abolishment of the goods and services tax, there's little inflationary pressure to trouble Governor Nor Shamsiah Mohd Yunus in his first policy meeting, even as other regional central banks hiked rates to bolster their respective currencies.

The ringgit has outperformed its Southeast Asian peers in the region, amid an exodus from emerging markets as rising trade tensions have turned investors risk-averse.      
   
CURRENCIES VS U.S. DOLLAR

Currency Latest bid Previous day Pct Move
Japan yen 111.180 110.84 -0.31
Sing dlr 1.354 1.3566 +0.18
Taiwan dlr 30.360 30.386 +0.09
Korean won 1115.400 1112.2 -0.29
Baht 33.110 33.13 +0.06
Peso 53.483 53.389 -0.18
Rupiah 14350.000 14320 -0.21
Rupee 68.790 68.72 -0.11
Ringgit 4.009 4.025 +0.40
Yuan 6.605 6.6117 +0.10


 Change so far in 2018

Currency Latest bid End 2017 Pct Move
Japan yen 111.180 112.67 +1.34
Sing dlr 1.354 1.3373 -1.24
Taiwan dlr 30.360 29.848 -1.69
Korean won 1115.400 1070.50 -4.03
Baht 33.110 32.58 -1.60
Peso 53.483 49.977 -6.56
Rupiah 14350.000 13565 -5.47
Rupee 68.790 63.87 -7.15
Ringgit 4.009 4.0440 +0.87
Yuan 6.605 6.5069 -1.48