June 14, 2018 / 6:31 AM / a year ago

EM ASIA FX-Asian currencies fall after Fed, downbeat China data

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    June 14 (Reuters) - Most Asian currencies edged lower on
Thursday after the Federal Reserve raised its interest rates for
the second time this year, and struck a more hawkish policy
    The Fed raised its benchmark overnight lending rate a
quarter of percentage point to a range of 1.75 percent to 2
percent, as expected, on the back of strong U.S. economic
    Fed policy makers projected two additional increases by the
end of this year compared to one previously, based on board
member's median forecast. 
    "We believe a rate hike in September is very likely given
the hawkish forecasts," said Qi Gao, FX strategist at
    "We remain bearish on the high-yielding INR and IDR as well
as the PHP with twin deficits," he said.
    The South Korean won was the biggest loser among
Asian currencies, shedding about 0.5 percent on Thursday.
    South Korea's vice finance minister said the government is
prepared for policy responses against any adverse impact from
the Fed's rate rise and that capital outflows shouldn't be too
big a concern just because of changes in interest rates.
    In a surprise for markets, the Chinese central bank resisted
following in the Fed's path, leaving its borrowing costs for
interbank loans unchanged.
    That decision came as China reported weaker-than-expected
activity data for May that showed the economy is finally slowing
under the weight of a prolonged crackdown on riskier lending.

    "The pause in rate hike against the backdrop of rising
default risk signals two things to us. First, the PBoC is likely
to return to neutral stance to safeguard the bottom line of no
financial risk after the recent data showed that structural
de-leverage has taken effect," said Tommy Xie, economist at OCBC
bank in a note.
    "Second, there is no urgency for China to maintain its
favorable yield differential against the U.S. as capital outflow
and currency stability is no longer the key concern for China at
the moment."
    The Philippine peso eased 0.1 percent on concerns
over high inflation, current account deficits and foreign
outflows. The Thai baht also inched lower on the day.
    On the other hand, the Malaysian ringgit rose 0.2
percent, after declines in the previous two sessions.
    Investors were also watching out for the European Central
Bank policy meeting on Thursday, in which policy makers could
signal their intentions to start unwinding the ECB's massive
bond purchasing programme.
    Analysts say a hawkish tone by the ECB would hurt regional
currencies more than the Fed's decision. 
    "There is much less clarity on the ECB and thus more upside
to the EUR," said Saktiandi Supaat, head of FX research at
Maybank in Singapore, in a report.
    Data from Asian stock exchanges show foreigners are leaving
the region's bond and equity markets this year as major central
banks are tightening their monetary policies after many years of
pump-priming their economies with easy money.  
    While these foreign outflows affect Asian markets, higher
foreign exchange reserves and a reduction in current account
deficits in many of the countries make them less vulnerable than
during previous regional crises.
    The following table shows rates for Asian currencies against
the dollar at 0603 GMT.
  Change as of  0603 GMT                           
  Currency                  Latest  Previous    Pct
                               bid       day   Move
  Japan yen                110.030    110.32  +0.26
  Sing dlr                 1.336      1.3353  -0.04
  Taiwan dlr               29.922     29.890  -0.11
  Korean won               1082.90    1077.2  -0.53
  Baht                     32.150      32.12  -0.09
  Peso                     53.290      53.23  -0.11
  Rupee                    67.675      67.64  -0.05
  Ringgit                  3.983       3.992  +0.23
  Yuan                     6.394      6.4007  +0.10
  *Indonesian markets are                          
       closed for holiday                     
  Change so far in 2018                            
  Currency                 Latest   End 2017    Pct
                           bid                 Move
  Japan yen                110.030    112.67  +2.40
  Sing dlr                 1.336      1.3373  +0.11
  Taiwan dlr               29.922     29.848  -0.25
  Korean won               1082.90   1070.50  -1.15
  Baht                     32.150      32.58  +1.34
  Peso                     53.290      49.93  -6.31
  Rupiah                   13925.0     13565  -2.59
  Rupee                    67.675      63.87  -5.62
  Ringgit                  3.983      4.0440  +1.53
  Yuan                     6.394      6.5069  +1.77
 (Reporting by Patturaja Murugaboopathy in Bengaluru; Additional
Reporting by Gaurav Dogra
Editing by Shri Navaratnam)
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