Trade jitters depress Asian currencies, yuan falls past 6.7/dlr

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BENGALURU (July 3): Asian currencies tumbled on Tuesday as investors remained on edge ahead of a US move later this week to impose tariffs on US$34 billion in Chinese exports to the United States.

The sell-off in the Chinese yuan continued as it slipped past the 6.7 per dollar mark for the first time in nearly a year.

The People's Bank of China (PBOC) set the midpoint roughly in line with market expectations before the market open, at 6.6497 yuan per dollar, its weakest fixing in about 10 months.

Trade tensions also battered Chinese stocks, with the Shanghai Composite Index dipping 1.9% to hit a fresh 28-month low. In Hong Kong, the Hang Seng index slumped 3.3% to its lowest in 10 months.

Meanwhile, in an effort to alleviate market concerns, the country's foreign exchange regulator said China was confident of maintaining stability in the yuan and keeping it at a 'reasonable' level.  

"An all-out trade war, under which all goods traded between China and the US are subject to 15-25% tariffs, would hurt the two economies' GDP growth rates mildly (quarter percent) in 2018 and substantially in 2019 (more than half a percent)," said Taimur Baig, Deutsche Bank's chief economist for Asia, in a note.

Baig added "this would set off a major global chain reaction. Given their trade open-ness and exposure to the electronics supply chain, there will be no respite whatsoever for Malaysia, Singapore, South Korea and Taiwan, in this tail risk scenario"

The Singapore dollar slipped 0.2%, while the Taiwan dollar weakened 0.3%.  

Brent crude oil futures were 0.7% higher putting pressure on major oil importing countries such as India, Indonesia and the Philippines as rising oil prices threaten to widen their fiscal deficits and spur inflation.

The Indonesian rupiah weakened 0.5%, while the Indian rupee slid 0.1%.

Elsewhere, the Thai baht dipped 0.4% and was among the region's biggest losers.

WON

The South Korean won slipped 0.3%, with softer inflation dampening prospects for tighter monetary policy.

Consumer prices in South Korea in June were 1.5% higher than a year earlier, data showed on Tuesday, less than the 1.7% expected in a Reuters poll.

Benchmark inflation has held below the Bank of Korea's 2% target since October last year, making inflation a hurdle to any monetary policy tightening even as interest rates in major economies are set to rise.

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

CURRENCIES VS US DOLLAR
Change on the day at 0534 GMT

Currency                     Latest bid  Previous day  % move
Japan yen                    110.930     110.89        -0.04
Sing dlr                     1.371       1.3690        -0.18
Taiwan dlr                   30.624      30.523        -0.33
Korean won                   1123.300    1120          -0.29
Baht                         33.260      33.12         -0.42
Peso                         53.487      53.419        -0.13
Rupiah                       14450.000   14375         -0.52
Rupee                        68.865      68.80         -0.10
Ringgit                      4.047       4.038         -0.22
Yuan                         6.704       6.6660        -0.56

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    110.930     112.67        +1.57
Sing dlr                     1.371       1.3373        -2.49
Taiwan dlr                   30.624      29.848        -2.53
Korean won                   1123.300    1070.50       -4.70
Baht                         33.260      32.58         -2.04
Peso                         53.487      49.977        -6.56
Rupiah                       14450.000   13565         -6.12
Rupee                        68.865      63.87         -7.25
Ringgit                      4.047       4.0440        -0.07
Yuan                         6.704       6.5069        -2.93