Indian rupee, Indonesian rupiah hit milestone lows on trade fears

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BENGALURU (June 28): Most Asian currencies edged down on Thursday, as a trade dispute between the world's two largest economies continued to keep investors on edge due to its potential spillover effect.

"Asian currencies are influenced by what happens to the renminbi and since the escalation of the trade tensions in the last week or two, we've really seen a large weakening in the renminbi and that has been the major driver of Asian currencies," said Khoon Goh, ANZ's head of Asia research.

"A lot of it really boils down to whether or not we are going to see any easing in these trade tensions... I think for now sentiment remains weak, we will continue to see further outflows both from the equity and bond markets in Asia and really that is going to be the main driver for further weakness in Asian asset prices."

Among regional currencies on Thursday, the Chinese yuan touched its weakest against the dollar since mid-December, 2017, losing 0.23%.

The People's Bank of China, the country's central bank, loosened the yuan's official midpoint for a seventh straight session.

The loosening of the PBOC's daily guidance rate was in line with Wednesday's, which was the biggest since January, 2017.

Export-dependent currencies such as South Korea's won and Taiwan's dollar lost 0.32% and 0.27%, respectively. A significant amount of the countries' exports are to China, leaving them exposed to a potential trade war-linked slowing of growth in the world's second-largest economy.

The Thai baht matched the direction of the rest of the region to weaken 0.18%. Data on Wednesday showed Thailand's manufacturing production index in May rose 3.2% from a year earlier, below the 3.5% rise forecast by a Reuters poll.

The Philippine peso bucked the regional trend to gain about 0.07%.

RUPIAH

Indonesia's rupiah slumped as much as 0.83% to touch its weakest since Oct 6, 2015. Its slide on Thursday cemented the rupiah's place as the region's third-worst performer in the year to date, down about 5%.

ANZ's Goh said the rupiah had been "a victim of previous success" to some extent, as there were strong inflows into Indonesia throughout 2017 and over the early part of 2018.

Foreign investors had gone overweight on Indonesian assets and the market was now seeing a change in that allocation of portfolio positioning.

The central bank, which raised its key interest rate twice in May, was likely to hike it again at a policy meeting on Friday, a Reuters poll showed.

RUPEE

The Indian rupee's 0.45% loss set it on track for a fourth straight losing session. The currency hit an all-time low of 69.09 to the dollar during the session.

Inflation and fiscal concerns have weighed on the rupee with oil accounting for a major share of India's current account deficit.

Up to Wednesday's close, Brent crude prices had run up more than 25% from its February low this year — a significant factor in inflation quickening in the country.

The concerns have led to outflows, with foreign institutional investors exiting equity derivative positions worth 10.75 billion rupees (US$156.01 million) on Wednesday, the National Stock Exchange's data showed.

The rupee has slid 7.32% in the year to date.

The following table shows rates for Asian currencies against the dollar at 0521 GMT.

CURRENCIES VS US DOLLAR
Change on day at 0521 GMT

Currency                   Latest bid  Previous day   % move
Japan yen                  110.280           110.25      -0.03
Sing dlr                   1.369             1.3672      -0.09
Taiwan dlr                 30.535            30.454      -0.27
Korean won                 1121.200          1117.6      -0.32
Baht                       33.060                33      -0.18
Peso                       53.529            53.569      +0.07
Rupiah                     14280.000          14173      -0.75
Rupee                      68.913             68.61      -0.45
Ringgit                    4.037              4.028      -0.22
Yuan                       6.617             6.6020      -0.23

Change so far in 2018

Currency                   Latest bid  End 2017       % move
Japan yen                  110.280           112.67      +2.17
Sing dlr                   1.369             1.3373      -2.28
Taiwan dlr                 30.535            29.848      -2.25
Korean won                 1121.200         1070.50      -4.52
Baht                       33.060             32.58      -1.45
Peso                       53.529            49.977      -6.64
Rupiah                     14280.000          13565      -5.01
Rupee                      68.913             63.87      -7.32
Ringgit                    4.037             4.0440      +0.17
Yuan                       6.617             6.5069      -1.67

(US$1 = 68.9050 Indian rupees)