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EM ASIA FX-Asian currencies hit by heightened prospects of Fed rate hike
March 3, 2017 / 6:01 AM / 9 months ago

EM ASIA FX-Asian currencies hit by heightened prospects of Fed rate hike

    * Rising expectations of U.S. March rate hike dent Asia FX
    * Asian currencies head for weekly declines
    * Losses led by S.Korean won, Taiwan dollar
    * Philippine peso touches fresh 10-year low

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy  and Masayuki Kitano
    BENGALURU/SINGAPORE, March 3 (Reuters) - Most emerging Asian
currencies fell against the dollar on Friday and were also on
track for weekly losses, pressured by growing expectations for a
U.S. Federal Reserve interest rate hike this month. 
    Leading the losses were the South Korean won and the Taiwan
dollar, the two emerging Asian currencies that have seen the
biggest gains against the greenback so far in 2017.
    The South Korean won slid more than 1 percent on
the day. For the week, the dollar was on track for a gain of
about 2 percent against the won, the greenback's biggest weekly
rise since January 2016. 
    The Taiwan dollar was down 0.6 percent on the day
against the greenback. For the week, the U.S. dollar was up
nearly 1.2 percent versus the Taiwan dollar, putting the
greenback on track for its largest gain in over a year.       
    Traders are buying back the dollar, having been forced into 
 suddenly bracing for the possibility of a U.S. interest rate
rise this month, said Satoshi Okagawa, senior global markets
analyst for Sumitomo Mitsui Banking Corporation in Singapore.
    "There is short-covering in the dollar across the board,"
Okagawa said.
    The Philippine peso slipped below a trough hit
last month and set a fresh 10-year low at 50.39 per dollar, its
weakest level since September 2006. The peso was last down 0.1
percent on the day at 50.38.
    A series of hawkish comments by Fed policymakers this week
has led to a sharp increase in market expectations for the Fed
to raise interest rates at its March 14-15 policy meeting,
giving a lift to the greenback.
    Investors will be watching comments from Fed Chair Janet
Yellen and Fed Vice Chair Stanley Fischer later on Friday to see
whether such market expectations will be reinforced. 
    U.S. Treasury yields have jumped this week, with the U.S
two-year note yield having risen to as high as 1.34 percent
, the highest since 2009, and further narrowing the
interest rate differential between emerging Asian countries and
the United States.  
    Such rises in U.S. yields can erode the relative
attractiveness of seeking higher yields in emerging market
countries, and lead to concerns about potential capital
    "There will be expectations for rate hikes over the next 12
months in Asia," said Saktiandi Supaat, Head of FX Research at
Maybank in Singapore.
    "Some of the Asian countries may not see too much of an
impact in terms of outflows. We need to see the pace of the U.S.
rate hike over the next six months before we figure it out." 
    The foreign fund flows in Asian markets have remained strong
so far this year on the back of strong economic data in the
    Strong GDP growth last year in Asian countries, such as
China and South Korea, has painted a positive picture about the
region's economy for 2017. 
    "I don't think we can say yet that we're headed for a phase
of capital outflows and across-the-board weakness in Asian
currencies," said Masashi Murata, currency strategist at Brown
Brothers Harriman in Tokyo. 
    "Even if there is a (Fed) rate hike in March, it's unclear
whether it can keep raising interest rates steadily in June and
    It could be difficult for the dollar to keep rising further
unless the market gets more specifics from U.S. President Donald
Trump on his plans for tax cuts and infrastructure spending,
Murata added.
  Change on the day at   0513 GMT                     
  Currency               Latest bid   Previous     Pct
                                           day    Move
  Japan yen                  114.14     114.40   +0.23
  Sing dlr                   1.4136     1.4129   -0.05
  Taiwan dlr                 30.994     30.795   -0.64
  Korean won                1154.00    1141.60   -1.07
  Baht                        35.04      34.98   -0.19
  Peso                       50.380     50.310   -0.14
  Rupiah                      13370      13357   -0.10
  Rupee                       66.84      66.71   -0.19
  Ringgit                    4.4530     4.4470   -0.13
  Yuan                       6.9000     6.8902   -0.14
  Change so                                           
 far in 2017                                    
  Currency               Latest bid   End prev     Pct
                                          year    Move
  Japan yen                  114.14     117.07   +2.57
  Sing dlr                   1.4136     1.4490   +2.50
  Taiwan dlr                 30.994     32.279   +4.15
  Korean won                1154.00    1207.70   +4.65
  Baht                        35.04      35.80   +2.17
  Peso                        50.38      49.72   -1.31
  Rupiah                      13370      13470   +0.75
  Rupee                       66.84      67.92   +1.62
  Ringgit                    4.4530     4.4845   +0.71
  Yuan                       6.9000     6.9467   +0.68

 (Reporting by Patturaja Murugaboopathy in Bengaluru and
Masayuki Kitano in Singapore; Editing by Randy Fabi)

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