Asia FX buoyed by soft dollar but down in Oct on US election, Fed rate worries

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SINGAPORE/SEOUL (Oct 31): Most emerging Asian currencies edged up on Monday, as the dollar retreated after news that the FBI will review more emails related to U.S. Democratic presidential candidate Hillary Clinton's private email server.

Regional currencies were set to post losses for the month, however, amid prospects of a U.S. Federal Reserve interest rate hike in December and mounting uncertainty over the U.S. presidential election on Nov 8.

For the day, China's yuan rose as the central bank in Beijing set its daily guidance rate at the strongest in more than a month.

South Korea's won turned firmer on exporters' demand for month-end settlements after hitting a 3-1/2-month low.

The U.S. dollar eased against a basket of major currencies on Friday, after the Federal Bureau of Investigation revealed its plan to review more emails related to Clinton's use of a private server, while she was secretary of state.
The investigation shook financial markets' conviction of a Clinton victory over Republican Donald Trump next week.

Scotiabank's FX strategist Qi Gao said the news may undermine Clinton's popularity, while the prospect of a Trump victory and ensuing uncertainty could see markets dial back expectations of a Fed tightening in December. Markets see Clinton as largely sticking to the status quo.

"Emerging Asian currencies may rebound if the odds of a Fed rate hike in December could decline due to the FBI's probe," said Gao in Singapore.

"But Asian currencies will not strengthen much as most Asian economies are export-driven, which will suffer from the protectionist policy if Trump wins," he added.

Still, markets stayed wary of a Fed's rate increase in December, especially as data showed on Friday the U.S. economy grew at its fastest pace in two years in the third quarter.

October slides

The yuan has lost 1.4% against the dollar so far in October.

The Chinese currency hit six-year lows last week as the central bank fixed mid-points weaker, reflecting the dollar's overall strength.

The won led regional losses in October, having lost 3.6% against the dollar so far this month, as political crisis in South Korea added to blows when bond outflows already hurt the currency.

President Park Geun-hye faces a deepening crisis over allegations an old friend enjoyed inappropriate influence over her. The woman at the centre of the scandal, Choi Soon-sil, returned to South Korea early on Sunday and her lawyer said she will cooperate with prosecutors.

The crisis has sent Park's public support to an all-time low. In one opinion poll, more than 40% of respondents said Park should resign or be impeached.

"Investors dislike political uncertainty, because it cannot be hedged. Investors have to reduce exposure, which is painful," said Tim Condon, chief economist for Asia at ING in Singapore.

"The decline in President Park's popularity seems above average, however, which has raised uncertainty. It would probably spike in the event she stepped down."

Among other emerging Asian currencies, the Singapore dollar has lost more than 2% so far this month.

The growing risk of a recession in the trade-reliant economy has raised the prospects of an off-cycle easing in policy, although for not the consensus among economists is for the central bank to sit tight, a Reuters poll showed earlier this month.

Thailand's baht has slid 0.9% throughout October, amid concerns that the death of King Bhumibol Adulyadej may increase political uncertainties and hurt economic activities in a near term.

The Malaysian ringgit has slumped 1.6% so far this month, as slides in crude prices underscored worries about the country's oil and gas revenues.

Change on the day at 0510 GMT

Currency Latest bid Previous day Pct Move
Japan yen 104.81 104.70 -0.10
Sing dlr 1.3916 1.3918 +0.01
Taiwan dlr 31.511 31.639 +0.41
Korean won 1142.60 1144.90 +0.20
Baht 34.98 35.05 +0.20
*Peso 48.405 48.405 0.00
Rupiah 13045 13048 +0.02
*Rupee 66.79 66.79 0.00
Ringgit 4.2005 4.1970 -0.08
Yuan 6.7697 6.7810 +0.17

Change so far in 2016

Currency Latest bid End prev year Pct Move
Japan yen 104.81 120.30 +14.78
Sing dlr 1.3916 1.4177 +1.88
Taiwan dlr 31.511 33.066 +4.93
Korean won 1142.60 1172.50 +2.62
Baht 34.98 36.00 +2.91
Peso 48.41 47.06 -2.79
Rupiah 13045 13785 +5.67
Rupee 66.79 66.15 -0.96
Ringgit 4.2005 4.2935 +2.21
Yuan 6.7697 6.4936 -4.08

  * Financial markets in India and the Philippines are closed for a holiday.