December 17, 2015 / 5:33 AM / 2 years ago

EM ASIA FX-Fed euphoria seen short-lived, falling yuan drags Asia FX lower

* Yuan slips, midpoint set at 4-1/2-year low
    * Singapore dlr at more than 3-week low on surprise export
fall
    * Won drops on foreign stock selling; ringgit down on oil

 (Adds details, updates prices)
    By Jongwoo Cheon
    SEOUL, Dec 17 (Reuters) - Most emerging Asian currencies
initially rose on Thursday after the Federal Reserve signalled
that further tightening beyond its U.S. rate hike would be slow,
but then they weakened as China's yuan hit a 4-1/2 year low.
    At the start of trading, most regional units were helped by
the Fed making clear its first hike in nearly a decade on
Wednesday was a tentative beginning to a "gradual" tightening
cycle. 
    But Asian currencies failed to maintain the appreciation
mood as the yuan touched its weakest level since June
2011 after China's central bank set its daily guidance rate at a
4-1/2-year low. 
    Most major banks have forecast a 5-7 percent fall in the
yuan next year, but some expect the renminbi to lose 10 percent
or more. That could encourage more money to leave China and
China-related investments, hurting some other regional
currencies. 
    "Our stance remains for a stronger USD/Asia FX outlook, with
further depreciation in the CNY adding another layer of pressure
on Asian currencies, especially those that are most closely
linked to China via trade and competitiveness channels, namely
the KRW and TWD," analysts for Barclays said in a note.
    They referred to the South Korean won and the
Taiwan dollar.
    The won turned weaker as foreign investors continued to sell
local stocks.
    Singapore's dollar hit its lowest since Nov. 24
after an unexpected slide in November exports raised concerns
over a slowdown in the trade-dependent economy. 
    The Malaysian ringgit reversed earlier gains as
sliding crude prices added to worries about the country's
falling oil and gas revenue.
    Indonesia's rupiah bucked the regional slide,
rising as traders covered short positions in the second-worst
performing Asian currency this year. Jakarta shares 
jumped more than 1 percent, while most government bond prices
 also rose.
    Some analysts said the Fed's stance was not necessarily seen
as dovish enough to support emerging Asian currencies for a
longer term.
    "We see the Fed was slightly hawkish," said Jeong My-young,
Samsung Futures research head in Seoul. "Given its upgrade in
economic forecasts and a hike in a unanimous decision, the Fed
is likely to emphasise on policy normalisation and raise rates."
    "There was no factor to reverse a strong dollar trend," said
Jeong, who expects emerging Asian currencies to weaken.
    The dollar on Thursday in Asia hit a two-week high
against a basket of major currencies.
    
    SINGAPORE DOLLAR
    The Singapore dollar lost 0.8 percent to 1.4175 per the U.S.
dollar, its weakest in more than three weeks, as leveraged
accounts and other funds sold the city-state's currency.
    Singapore's exports fell 3.3 percent in November from a year
earlier on declining sales to China and Europe. A Reuters poll
had expected a 1.5 percent rise. 
    The local currency is seen weakening to 1.4185, the 76.4
percent Fibonacci retracement of its appreciation from November
to December, analysts said.
    The next levels would be 1.4260-1.4265, its lows in
November, they added.
    
    WON
    The won started the day firmer on improving risk appetite as
investors saw the Fed's rate increase as a signal of confidence
in the world's largest economy.
    But the South Korean currency changed direction as offshore
funds sold it, with foreigners extending their selling spree in
the Seoul stock market to a 12th straight session.
    "It looks risky to expect risky assets to find support from
relief after the U.S. rate hike was not that hawkish," said a
foreign bank trader in Seoul.
     The trader said he'll buy the dollar on dips, adding that
Korean authorities "may allow a gradually-weakening won to boost
exports."
    
    CURRENCIES VS U.S. DOLLAR
    Change on the day at 0520 GMT
  Currency    Latest bid   Previous day    Pct Move
  Japan yen       122.47         122.22       -0.20
  Sing dlr        1.4155         1.4068       -0.61
  Taiwan dlr      32.810         32.950       +0.43
  Korean won     1180.90        1176.20       -0.40
  Baht             36.08          36.07       -0.03
  Peso             47.36          47.34       -0.03
  Rupiah        14050.00       14065.00       +0.11
  Rupee            66.64          66.73       +0.14
  Ringgit         4.3280         4.3120       -0.37
  Yuan            6.4820         6.4733       -0.13
 
  Change so far in 2015
  Currency    Latest bid  End prev year    Pct Move
  Japan yen       122.47         119.66       -2.30
  Sing dlr        1.4155         1.3260       -6.32
  Taiwan dlr      32.810         31.718       -3.33
  Korean won     1180.90        1099.30       -6.91
  Baht             36.08          32.90       -8.81
  Peso             47.36          44.72       -5.56
  Rupiah        14050.00       12380.00      -11.89
  Rupee            66.64          63.03       -5.42
  Ringgit         4.3280         3.4965      -19.21
  Yuan            6.4820         6.2040       -4.29
 
    

 (Additional reporting by Reuters FX Analyst Rick Lloyd, IFR
Markets' Catherine Tan in SINGAPORE and Yena Park; Editing by
Richard Borsuk)

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