Most Asian currencies track yuan higher on upbeat China exports, FX reserves

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BENGALURU (Aug 8): Stronger-than-expected readings on China's exports and foreign exchange reserves boosted the yuan and most other Asian emerging currencies on Wednesday, even as the United States said tariffs on more Chinese goods will go into effect within weeks.

"Better than expected Chinese reserves have helped to stabilize RMB sentiment, which is in turn supporting Asian currencies as well," said Wei Liang Chang, an FX strategist at Mizuho Bank.

The offshore yuan strengthened slightly to an over 1-week high.

China reported on Wednesday that July exports rose more than expected, suggesting fresh US tariffs imposed last month have not yet had a significant impact on global demand for its goods.

"Relatively strong Chinese trade data today suggest that any Chinese slowdown from trade tensions has been modest, which further underpin a small gain in the yuan today," Chang added.

Further bolstering sentiment, data on Tuesday showed China's foreign exchange reserves unexpectedly rose in July to US$3.118 trillion, with few hints of capital flight that some investors have feared after a sharp drop in the yuan currency in recent weeks due to escalating trade tensions.

The People's Bank of China set the midpoint of the yuan's daily trading band at 6.8313 per dollar, 118 pips firmer than the previous fixing of 6.8431.

The Thai baht advanced 0.1% ahead of the central bank's interest rate decision due later in the day, with the bank expected to stay on hold as inflation remains mild.

Korean won and Singapore's dollar strengthened 0.5% and 0.1%, respectively.  

The Philippine peso bucked the regional trend and weakened 0.1% against the greenback despite expectations of more policy tightening in Manila this week.

"A significant deterioration in the Philippines trade balance on the back of a surge in imports, which has weighed on the PHP despite expectations of a BSP rate hike tomorrow," said Chang.

Philippine imports in June grew at the fastest pace this year while exports dipped, government data showed.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla on Tuesday signalled a further uptick in inflation required a policy response, leading some analysts to believe policymakers would deliver as much as a 50-basis-points rate hike on Thursday.

Indian rupee

India's rupee firmed 0.1% on the day but stays the worst performing Asian currency this year, having declined about 7% to date.

India's central bank will need to gradually tighten monetary policy further due to rising inflation, mainly driven by higher oil prices and a falling rupee, the International Monetary Fund said on Wednesday.

It said inflationary pressures were also exerted by a pick up in domestic demand and recent hike in procurement prices of major crops by the government, as it seeks to win support from farmers ahead of national elections next year.

The following table shows rates for Asian currencies against the dollar at 0536 GMT.

CURRENCIES VS US DOLLAR

Currency                     Latest bid  Previous day  % move
Japan yen                    111.250     111.37        +0.11
Sing dlr                     1.364       1.3642        +0.05
Taiwan dlr                   30.607      30.621        +0.05
Korean won                   1117.800    1123.8        +0.54
Baht                         33.185      33.23         +0.14
Peso                         52.920      52.85         -0.13
Rupiah                       14430.000   14435         +0.03
Rupee                        68.645      68.68         +0.05
Ringgit                      4.073       4.074         +0.02
Yuan                         6.825       6.8278        +0.04

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    111.250     112.67        +1.28
Sing dlr                     1.364       1.3373        -1.92
Taiwan dlr                   30.607      29.848        -2.48
Korean won                   1117.800    1070.50       -4.23
Baht                         33.185      32.58         -1.82
Peso                         52.920      49.977        -5.56
Rupiah                       14430.000   13565         -5.99
Rupee                        68.645      63.87         -6.96
Ringgit                      4.073       4.0440        -0.71
Yuan                         6.825       6.5069        -4.66