Most Asian currencies strengthen; hopes pinned on US-China talks

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BENGALURU (Aug 16): Most Asian currencies strengthened on Thursday, with the Chinese yuan leading the gains, after news of proposed Sino-US negotiations sparked hopes of a trade war armistice.

China's Ministry of Commerce said on Thursday that it had been invited by the United States to hold trade talks with US Under Secretary of the Treasury for International Affairs David Malpass.

News of proposed negotiations between Beijing and Washington lifted spirits in what has been a grim week for regional currencies after Turkey's currency crisis spilled over into other emerging markets, compounded by weak macro-economic data from China.

The dollar index against a basket of six major currencies was 0.17% lower at 96.536. It pulled back from a 13-month high of 96.984 scaled the previous day on demand for safe-haven assets.

China's yuan strengthened as much as 0.8% against the dollar, its best session in nearly seven months.

Prior to market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate at 6.8946 per dollar, its weakest level since May 12 2017, and 90 pips weaker than the previous fix of 6.8856.

Indonesia's rupiah strengthened slightly to 14,595, pulling back from its weakest point in almost three years seen on Wednesday, after the country's central bank raised interest rates for the fourth time since mid-May as a defensive measure.

Bank Indonesia's intensified efforts come after the rupiah was battered this week by international political tensions and concerns about the country's widening trade deficit.

Indonesia reported on Wednesday a wider than expected July trade deficit of US$2 billion, the biggest in five years and more than triple what economists expected, as the value of imports hit a record high.

Singapore's dollar strengthened 0.44% and the Thai Baht was 0.24% stronger

South Korea's won and the Indian rupee were the only currencies in the region that weakened.

The Indian rupee

The region's worst performing currency this year, India's rupee weakened as much 0.6% to hit a record low as worries about a widening trade deficit soured sentiment.

The trade ministry said on Tuesday that India's trade deficit widened to 18.02 billion in July, its highest in more than five year highs, driven largely by a surge in oil imports.

Inflation remains a central concern for a country that imports 80% of its crude oil needs, so rising oil prices also weigh on the currency.

A senior finance ministry official said on Tuesday that intervention by India's central bank may not do much to stabilise the rupee after it plunged to record lows on Monday in the fallout from Turkey's currency crisis.

"With an apparently shallow central bank tightening cycle ahead, the current rupee depreciation trend looks to be a prolonged one," ING said in a note.

"The next challenge will be a string of state elections, which should see investors starting to add a political risk premium into local financial assets."

Prime Minister Narendra Modi, who is struggling to cap inflation, is expected to seek a second term in national elections in 2019.

The following table shows rates for Asian currencies against the dollar at 0534 GMT.


Currency                     Latest bid  Previous day  % move
Japan yen                    110.790     110.73        -0.05
Sing dlr                     1.374       1.3799        +0.42
Taiwan dlr                   30.842      30.858        +0.05
Korean won                   1127.600    1127.9        +0.03
Baht                         33.260      33.32         +0.18
Peso                         53.467      53.47         +0.01
Rupiah                       14575.000   14595         +0.14
Rupee                        70.195      69.90         -0.43
Ringgit                      4.097       4.102         +0.12
Yuan                         6.885       6.9340        +0.72

Change so far in 2018

Currency                     Latest bid  End 2017      % move
Japan yen                    110.790     112.67        +1.70
Sing dlr                     1.374       1.3373        -2.68
Taiwan dlr                   30.842      29.848        -3.22
Korean won                   1127.600    1070.50       -5.06
Baht                         33.260      32.58         -2.04
Peso                         53.467      49.93      -6.62
Rupiah                       14575.000   13565         -6.93
Rupee                        70.195      63.87         -9.01
Ringgit                      4.097       4.0440        -1.29
Yuan                         6.885       6.5069        -5.49