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EM ASIA FX-Asian currencies firm as cautious Fed view boosts risk appetite
July 17, 2017 / 6:49 AM / in 5 months

EM ASIA FX-Asian currencies firm as cautious Fed view boosts risk appetite

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    July 17 (Reuters) - Most Asian currencies edged higher on
increased risk appetite as investors tempered their expectations
for a third interest rate hike by the Federal Reserve this year
following weak U.S. economic data for June.
     U.S. consumer prices were unchanged in June and retail
sales fell for a second straight month, pointing to tame
inflation and soft domestic demand. The dollar index  was
up just 0.05 percent at 95.195, not far away from its 10-month
trough hit on Friday.
    "While odds of balance sheet reduction in September seems to
have increased, chances of another hike by year end seems to
have come down, because of the lower than expected inflation.
This is positive for Emerging Asian currencies." said Sim Moh
Siong, FX strategist at Bank of Singapore.
    "I think for now, the theme is hunt for yield in the EM
markets".
    Fed funds futures imply around a 50-50 chance of
another hike by December, and have less than two moves priced in
for all of next year. Fed policymakers have pencilled in one
more rise this year and a further four in 2018.
    China's economic data showing second-quarter gross domestic
product grew at a faster pace than expected pace also lifted
Asian currencies, even as analysts tip momentum to cool over the
rest of the year as policymakers seek to reduce financial risks.

    China's yuan inched up after the central bank
lifted its official guidance for the currency's midpoint to an
8-1/2-month high.
    Trade data from Singapore was also solid, with exports
growing at double the expected pace last month, and helping the
local dollar edge up to its highest since October last
year.
    In Indonesia, data showed exports and imports contracted in
June on a yearly basis for the first time in nine months, though
the country still posted a trade surplus.
    The Indonesian rupiah was up nearly 0.2 percent
against the dollar on the day.
    The broader risk-on mood also pushed the South Korean won
 up nearly half a percent. Analysts expect robust
exports data for the first 20 days of July, due out on Thursday.

    Thomson Reuters data showed the volatilities of most of the
Asian currencies have declined recently. The 3-month volatility
of the Indonesian rupiah stood at 5.17 percent on Monday,
compared to 9 percent at the start of the year, while the Indian
rupee's volatility stood at 4.7 percent, much lower than 5.75
percent at the start of the year.
    Analysts said the scenario is perfect for carry trades.
    "Generally the high yielding ones like the Indian rupee and 
Indonesian rupiah will be preferred for carry trades," said Bank
of Singapore's Sim.
    "They have seen a bit of a wobble over the last few weeks.
Some of that wobble may start to settle down, given the growth
is resilient globally and the central banks are quite cautious
in tightening going forward." 
    
    
    
    The following table shows rates for Asian currencies against
the dollar at 0559 GMT.
    
    CURRENCIES VS U.S. DOLLAR
 
  Change on the day at                                        
        0559 GMT                                     
  Currency                 Latest bid  Previous day   Pct Move
  Japan yen             112.640               112.5      -0.12
  Sing dlr              1.369                1.3711      +0.13
  Taiwan dlr            30.371               30.417      +0.15
  Korean won            1128.400             1133.3      +0.43
  Baht                  33.700                33.85      +0.45
  Peso                  50.630                50.65      +0.04
  Rupiah                13315.000             13337      +0.17
  Rupee                 64.353                64.45      +0.14
  Ringgit               4.291                 4.291      +0.01
  Yuan                  6.769                6.7741      +0.07
                                                              
  Change so far in                                            
 2017                                                
  Currency              Latest bid     End 2016       Pct Move
  Japan yen             112.640              117.07      +3.93
  Sing dlr              1.369                1.4490      +5.82
  Taiwan dlr            30.371               32.279      +6.28
  Korean won            1128.400            1207.70      +7.03
  Baht                  33.700                35.80      +6.23
  Peso                  50.630                49.72      -1.80
  Rupiah                13315.000             13470      +1.16
  Rupee                 64.353                67.92      +5.54
  Ringgit               4.291                4.4845      +4.52
  Yuan                  6.769                6.9467      +2.62
 
 (Reporting by Patturaja Murugaboopathy; Editing by Shri
Navaratnam)
  
 
 

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