Most Asian currencies tread water as Fed eyed amid trade war fears

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BENGALURU (Aug 1): Most Asian currencies took to the sidelines on Wednesday, with China's yuan choppy amid media reports that Washington plans to raise tariffs on US$200 billion of imported Chinese goods.

Overall, traders were reluctant to make any big bets on regional currencies as they waited on the US Federal Reserve's policy meeting later in the global day followed by the Bank of England's own rates review on Thursday.

A raft of Asian manufacturing surveys also showed cooling factory activity with heightened concerns the Sino-US trade dispute risks rippling across global supply chains in a blow to world growth.

The dollar index, a measure of its value against a basket of six major currencies, strengthened 0.2% at 94.649.

Traders were cautious after media reports said the Trump administration plans to propose slapping tariffs of 25% tariff, instead of 10%, on US$200 billion of imported Chinese goods.

Trading in the Chinese yuan was a little choppy after Bloomberg reported earlier, citing sources, that representatives of US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have been speaking privately as they seek to restart negotiations.

"While the US has threatened tariffs on Chinese imports, it was cushioned by news that Liu He and Mnuchin are exploring a restart of trade negotiations," said Wei Liang Chang, an FX strategist at Mizuho Bank.

"The US tariffs could be seen as an opening bid for negotiations, and any negative repercussions on Asian FX could thus be discounted for now."

Besides manufacturing surveys due out in Europe later in the day, more catalysts will be on offer for traders as the Fed is expected to keep rates on hold and remain on track to tighten twice more by year-end, while the Bank of England is set to raise borrowing costs on Thursday.

The Thai baht strengthened 0.2%, while the Malaysia's ringgit and Indonesia's rupiah weakened 0.1% and 0.2%, respectively.

India's rupee was trading steady ahead of the Reserve Bank of India's policy meeting, which is expected to raise rates, according to a Reuters poll.

Chinese yuan

China's yuan was largely unchanged after booking its fourth straight month of losses on Tuesday, as traders tried to weigh the latest reports on the volatile Sino-US trade relations.

Earlier in the day, a private survey showed China's manufacturing sector grew at the slowest pace in eight months in July as export orders declined yet again in a worrying sign amid an escalating trade dispute with the United States.

Prior to market opening, the People's Bank of China lowered the daily yuan midpoint to 6.8293 per dollar, 128 pips or 0.19% weaker than the previous fix of 6.8165.

Wednesday's fixing, the lowest since May 31, 2017, largely matched market forecasts, traders said.

The following table shows rates for Asian currencies against the dollar at 0512 GMT.

CURRENCIES VS US DOLLAR

Currency                     Latest bid  Previous day  % move
Japan yen                    111.910     111.86        -0.04
Sing dlr                     1.362       1.3609        -0.08
Taiwan dlr                   30.608      30.614        +0.02
Korean won                   1120.700    1118.7        -0.18
Baht                         33.170      33.26         +0.27
Peso                         53.083      53.095        +0.02
Rupiah                       14437.000   14415         -0.15
Rupee                        68.560      68.54         -0.03
Ringgit                      4.065       4.063         -0.05
Yuan                         6.820       6.8181        -0.03

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    111.910     112.67        +0.68
Sing dlr                     1.362       1.3373        -1.81
Taiwan dlr                   30.608      29.848        -2.48
Korean won                   1120.700    1070.50       -4.48
Baht                         33.170      32.58         -1.78
Peso                         53.083      49.93         -5.94
Rupiah                       14437.000   13565         -6.04
Rupee                        68.560      63.87         -6.84
Ringgit                      4.065       4.0440        -0.52
Yuan                         6.820       6.5069        -4.59