Most Asian currencies rise in wake of China c.bank move

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BENGALURU (Aug 6): Most Asian currencies strengthened on Monday after China's central bank took steps late last week to rein in sharp declines in the yuan, but the latest round of sabre-rattling in the Sino-US trade war dented sentiment across markets.

The People's Bank of China (PBOC) on Friday said it would require banks to keep reserves equivalent to 20% of their clients' dollar forward positions, essentially making it more costly to short the yuan and helping it rebound from a near 15-month low against the greenback.

"The move signals that policymakers' appetite for a weaker RMB from here is limited, although PBOC keenly stressed that the reserve requirement is a non-discriminatory, price-based prudential tool, not a capital control," Mizuho Bank said in a note.

A stronger yuan typically bolsters emerging currencies in Asia, with the Taiwan dollar and Philippine peso strengthening 0.3% and 0.1% respectively on Monday.

Indonesia's rupiah edged up 0.1% amid data showing Indonesia's economy beat forecasts to grow at its fastest clip in 4½ years in April-June.

Elsewhere, the dollar index, a measure of the greenback against a basket of six major currencies, was 0.2% higher after US jobs data reinforced investor expectations the Federal Reserve would gradually raise interest rates this year.     

China's yuan

The yuan seesawed in a narrow range on Monday, as the trade tensions between Beijing and Washington overshadowed the central bank's attempts to shore up the yuan.

Chinese state media on Monday lashed out at US President Donald Trump's trade policies in an unusually personal attack.

That came after China's finance ministry on Friday unveiled new sets of additional tariffs on over 5,000 goods imported from the United States worth US$60 billion. The move was in response to the Trump administration's proposal of a 25% tariff on US$200 billion worth of Chinese imports.

"Although China's absolute retaliation (on trade) is much smaller, from a percentage perspective, China's (tariff) lists have covered about 80% of Chinese imports from the US, much higher than the about 50% ratio proposed by the US," OCBC said in a note to clients.

"This is a surprise in our view as it shows that China does not fear further escalation of the trade war. Nevertheless, this could be bad for market sentiment," the Singaporean bank said.

China's central bank set the yuan's daily midpoint at 6.8513 per dollar, its weakest level since May 31, 2017, but largely matching forecasts.    

The following table shows rates for Asian currencies against the dollar at 0518 GMT.

CURRENCIES VS US DOLLAR

Currency                     Latest bid  Previous day  % move
Japan yen                    111.310     111.25        -0.05
Sing dlr                     1.367       1.3663        -0.02
Taiwan dlr                   30.607      30.706        +0.32
Korean won                   1123.200    1127.6        +0.39
Baht                         33.240      33.25         +0.03
Peso                         53.023      53.055        +0.06
Rupiah                       14470.000   14490         +0.14
Rupee                        68.623      68.61         -0.03
Ringgit                      4.075       4.08          +0.12
Yuan                         6.830       6.8288        -0.02

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    111.310     112.67        +1.22
Sing dlr                     1.367       1.3373        -2.14
Taiwan dlr                   30.607      29.848        -2.48
Korean won                   1123.200    1070.50       -4.69
Baht                         33.240      32.58         -1.99
Peso                         53.023      49.977        -5.74
Rupiah                       14470.000   13565         -6.25
Rupee                        68.623      63.87         -6.93
Ringgit                      4.075       4.0440        -0.76
Yuan                         6.830       6.5069        -4.73