Most Asian currencies extend lira relief rally, China's yuan weak

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BENGALURU (Aug 17): Most Asian currencies firmed on Friday as the Turkish lira recovered and investors scanned the horizon for cues from Sino-US negotiations.

News of proposed negotiations between Beijing and Washington lifted spirits in what has been a grim week for regional currencies after Turkey's currency crisis spilled over into other emerging markets, compounded by weak macro-economic data from China.

Ahead of the negotiations, however, the US-China trade dispute is set to intensify next week with both sides planning to hike tariffs on more of each other's goods, threatening to pile more pressure on China's already slowing economy.

The dollar index, a measure of the greenback's strength against a basket of six major peers, inched 0.1% lower to 96.543.

The safe-haven dollar pulled back from 13½-month highs after the world's two biggest economies agreed on Thursday to hold a new round of trade talks next week.

The Turkish lira was little changed at 5.8 per dollar after plunging to record lows on Monday, triggering a huge sell-off in emerging market currencies.

But thanks to efforts by Turkey's central bank to support the lira and Qatar's pledge to invest US$15 billion in Turkey, the lira recovered from the depths of its slump.

Nonetheless "While ruling out capital controls has been somewhat reassuring, there are scant details as how the (Turkish) government will stabilise the currency," Mizuho analysts said in a note.

"As a result, volatility could resurface as the US looks to impose additional sanctions on Turkey if it refuses to release a detained American pastor."

US Treasury Secretary Steven Mnuchin assured President Donald Trump at a cabinet meeting on Thursday that sanctions were ready to be put in place if Pastor Andrew Brunson, on trial in Turkey on terrorism charges, was not freed.

China's yuan was 0.03% weaker and on track for its 10th straight weekly loss, extending its longest weekly losing streak since 1994.

Prior to market opening on Friday, the People's Bank of China (PBOC) set the yuan's midpoint higher for the first time in seven days to 6.8894 per dollar, 52 pips firmer than the previous fix of 6.8946.

Traders and analysts said Friday's fixing came in stronger than their models had suggested, showing the PBOC's discomfort with recent volatility in the yuan.

The Malaysian ringgit firmed slightly but was on track to finish lower for a third consecutive week.

Malaysia's economy expanded at the much slower pace of 4.5% in the second quarter, hit by commodity production shocks, data out on Friday showed.

Annual expansion in Malayasia's economy fell in the second quarter to 4.5%, well below January-March's 5.4% and a Reuters poll forecast for 5.2%.

But boosting sentiment was Malaysia's central bank saying it would allow greater flexibility for exporters in management of their export proceeds, relaxing rules introduced in 2016 to support the ringgit.

The Philippine peso

The Philippine peso was 0.1% stronger after central bank said it did not expect inflation to reach 6% or even 7% and was optimistic that inflation will ease.

The Philippine central bank has raised rates by 100 basis points since May, including a last 50-bps hike on Aug 9, and signalled it was open to further tightening to tame consumer price growth.

The Philippines has been seeking to prop up its weak currency, as interest rate increases in the United States and Philippines current account deficit has led to capital outflows.

The peso has weakened 6.5% this year and is among the three worst-performing currencies in the region.

The following table shows rates for Asian currencies against the dollar at 0552 GMT.

CURRENCIES VS US DOLLAR

Currency                     Latest bid  Previous day  % move
Japan yen                    110.860     110.88        +0.02
Sing dlr                     1.375       1.3757        +0.04
Taiwan dlr                   30.773      30.845        +0.23
Korean won                   1124.400    1130.1        +0.51
Baht                         33.190      33.28         +0.27
Peso                         53.407      53.44         +0.06
Ringgit                      4.102       4.103         +0.02
Yuan                         6.893       6.8900        -0.04

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    110.860     112.67        +1.63
Sing dlr                     1.375       1.3373        -2.76
Taiwan dlr                   30.773      29.848        -3.01
Korean won                   1124.400    1070.50       -4.79
Baht                         33.190      32.58 -1.84
Peso                         53.407      49.93         -6.51
Ringgit                      4.102       4.0440        -1.41
Yuan                         6.893       6.5069        -5.60