Most Asian currencies weaken as investors await central banks meetings

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BENGALURU (July 30): Most Asian currencies weakened on Monday as investors braced ahead of a busy week lined with central bank meetings, corporate results and updates on US inflation and payrolls.

Central banks in focus include the Bank of Japan, which ends a two-day meeting on Tuesday, and the Federal Reserve, which concludes its policy meeting on Wednesday. The Bank of England also makes a policy decision on Thursday.

Financial markets are waiting to see whether the BOJ will announce tweaks to its massive stimulus programme to make it more sustainable.

The dollar index against a basket of six major currencies strengthened slightly to 94.735.

China's yuan led losses regionally, weakening 0.4% followed by India's rupee and Malaysia's ringgit, which weakened 0.2% and 0.1%, respectively.

"Ringgit will continue to struggle amid concerns over trade war impact on China's economy and upcoming," said Stephen Innes, head of trading APAC at Oanda.

"Dealers will remain cautious shorting the US dollar ahead of this week's non-farm payroll (data)."

The Reserve Bank of India holds its policy meeting on Wednesday at which it is expected to raise rates, according to a Reuters poll.

The Indian rupee has been the worst performing Asian currency in 2018, however, the RBI has recognised that the factors behind its depreciation, such as a hawkish Fed and rising oil prices, are beyond its control, and chosen to smooth overshoots through timely intervention.

The Korean won edged up slightly and was quoted at 1,114.2 per dollar on the onshore settlement platform, 0.35% firmer than its previous close at 1,118.1.

The Philippine peso strengthened 0.1% while Singapore's dollar weakened 0.1%.

Thai markets were closed for a local holiday.

CHINESE YUAN

China's yuan which has been under pressure amid escalating trade war tensions fell to a 13-month low against the dollar on Monday.

Prior to market opening, the PBOC lowered the midpoint rate to 6.8131 per dollar, largely matching market forecasts, 189 pips or 0.28% weaker than the previous fix of 6.7942 last Friday.

Last week, the Chinese currency weakened 0.4% against the dollar, its seventh straight weekly loss.

INDONESIAN RUPIAH

Indonesia's rupiah traded flat as investors remained cautious ahead of this week's central bank's meetings.

The rupiah has weakened nearly 6% so far this year and Southeast Asia's largest economy is trying get its exporters to bring home earnings they currently keep offshore to help manage the rupiah from falling further.

Bank Indonesia has done more than any Asian peer to defend its currency but it remains hostage to forces outside its control, including rising US interest rates, higher oil prices and the Washington-Beijing trade conflict.

The finance ministry is also reducing rupiah bond issuance, hoping to meet some financing needs with additional foreign-currency loans from lenders such as the World Bank and the Asia Development Bank.

The following table shows rates for Asian currencies against the dollar at 0533 GMT.

CURRENCIES VS US DOLLAR

Currency                Latest bid  Previous day  % move
Japan yen               111.040           111.03     -0.01
Sing dlr                1.362             1.3614     -0.05
Taiwan dlr              30.612            30.592     -0.07
Korean won              1116.700          1118.1     +0.13
Baht*                   33.310             33.31     +0.00
Peso                    53.230            53.285     +0.10
Rupiah                  14412.000          14415     +0.02
Rupee                   68.730             68.65     -0.12
Ringgit                 4.063               4.06     -0.07
Yuan                    6.834             6.8140     -0.29

* Closed for market holiday

Change so far in 2018

Currency                Latest bid  End 2017      % move
Japan yen               111.040           112.67     +1.47
Sing dlr                1.362             1.3373     -1.82
Taiwan dlr              30.612            29.848     -2.50
Korean won              1116.700         1070.50     -4.14
Baht                    33.310             32.58     -2.19
Peso                    53.230             49.93     -6.20
Rupiah                  14412.000          13565     -5.88
Rupee                   68.730             63.87     -7.07
Ringgit                 4.063             4.0440     -0.47
Yuan                    6.834             6.5069     -4.79