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EM ASIA FX-Firm dollar undermines Asia FX, bonds; yuan at fresh 6-year low
October 17, 2016 / 4:46 AM / a year ago

EM ASIA FX-Firm dollar undermines Asia FX, bonds; yuan at fresh 6-year low

* PBOC sets yuan fixing at 6-year low; intervention caution
    * Won at 3-mth low on offshore selling; Korean exporters cap
    * Baht falls after foreigners slash Thai stocks, bonds
    * Ringgit around 8-month low; Malaysia bond prices down

 (Adds text, updates prices)
    By Jongwoo Cheon
    SINGAPORE, Oct 17 (Reuters) - Emerging Asian currencies lost
ground on Monday after comments by Federal Reserve Chair Janet
Yellen boosted long-dated U.S. bond yields, sending the dollar
higher and spurring investors to cut bond holdings in the
    Regional currencies came under further pressure as solid
U.S. retail sales and producer price data for September
reinforced expectations that the Fed will raise interest rates
in December. 
    The Chinese yuan slumped to its weakest since
September 2010 on a weak central bank guidance rate,
but selling was tempered by caution over possible intervention
by authorities to halt further depreciation. 
    South Korea's won hit a near three-month low as
offshore funds dumped the currency. 
    The Thai baht fell on concerns that the economy
could slow and rising political uncertainty after the death of
King Bhumibol Adulyadej.
    Malaysia's ringgit hovered a near eight-month trough,
tracking lower government bond prices.
    Singapore's dollar slumped to its weakest in more
than seven months, despite a smaller-than-expected drop in
September exports. 
    Yellen said on Friday the Fed may need to run a
"high-pressure" economy in order to reverse damage from the
global financial crisis that depressed output. Her remarks
raised speculation that she may prefer to keep an easy monetary
policy stance for a long time, pushing up yields of long-dated
U.S. bond. 
    "EM Asia bonds will get sold off based on the fact
that Yellen's thesis of allowing inflation will cause global
bonds to reprice in the forward inflation premium," said Stephen
Innes, senior FX trader for FX broker OANDA in Singapore.
    "With the solid growth differential offered in EM Asia, I
think the sell-off will be short-lived. Still, we need a
constructive policy direction from the Fed," Innes said.
    The U.S. central bank needs to guide the market to December
lift-off and stop with theoretical concepts, which have been
confusing investors, he said.
    The won lost 1.0 percent to 1,143.6 per dollar, its weakest
since July 20.
    The South Korean unit may weaken to 1,150, analysts said. It
has the 38.2 percent Fibonacci retracement at 1,149.1 of its
appreciation in 2016 and the 61.8 percent level of 1,150.8 of
its strength from June to September.
    Some exporters bought the unit on dips for settlements,
limiting its downside.
    Such corporate demand is likely to gather pace as the
month-end is approaching, traders in Seoul said.
    The baht slid after foreign investors were net sellers in
Thailand's stocks and bonds last week.
    The Thai currency recouped some early losses as foreigners
bought local bonds, the Thai Bond Market Association data
    As Thais begin a year of mourning for their king, parties
and celebrations will be toned down, particularly over the next
month, temporarily crimping consumer and tourist spending in an
economy that has been struggling for traction in recent years.
    "Thailand will not only be entering a period of mourning,
but one of dynamic changes and political uncertainty," said Mark
Mobius, executive chairman of Templeton Emerging Markets Group.
    "Under such circumstances, market observers will be looking
out for potential issues over political friction and royal
succession, and investors should be prepared for volatility. In
the long run however, we believe the market uncertainty will
ultimately be outweighed by Thailand's strong fundamentals," he
    The ringgit fell 0.5 percent to 4.2175 per dollar. That
compared with 4.2210, hit on Oct. 13, its weakest since Feb. 29.
    The Malaysian currency came under further pressure as lower
crude prices underscored concerns about the country's oil and
gas revenues.
    Currency traders were looking to sell the currency on
rallies given slides in Malaysian bond prices.
    "This global bond weakness will make yields go higher and
lead to EM Asian bonds sell-off," said a senior Malaysian bank's
currency trader in Kuala Lumpur.
    "4.25 looks to be a reasonable target by end of this week,"
the trader added.

    Change on the day at 0430 GMT
  Currency                Latest bid   Previous day   Pct Move
  Japan yen                   104.27         104.16      -0.11
  Sing dlr                    1.3917         1.3905      -0.09
  Taiwan dlr                  31.805         31.672      -0.42
  Korean won                 1143.30        1132.10      -0.98
  Baht                         35.36          35.28      -0.21
  Peso                        48.545         48.440      -0.22
  Rupiah                       13053          13042      -0.08
  Rupee                        66.86          66.70      -0.24
  Ringgit                     4.2175         4.1980      -0.46
  Yuan                        6.7335         6.7271      -0.10
  Change so far in 2016                                       
  Currency                Latest bid  End prev year   Pct Move
  Japan yen                   104.27         120.30     +15.37
  Sing dlr                    1.3917         1.4177      +1.87
  Taiwan dlr                  31.805         33.066      +3.96
  Korean won                 1143.30        1172.50      +2.55
  Baht                         35.36          36.00      +1.82
  Peso                         48.55          47.06      -3.06
  Rupiah                       13053          13785      +5.61
  Rupee                        66.86          66.15      -1.07
  Ringgit                     4.2175         4.2935      +1.80
  Yuan                        6.7335         6.4936      -3.56
 (Reporting by Jongwoo Cheon; Additional reporting by Nichola
Saminather; Editing by Kim Coghill)

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