October 2, 2017 / 7:21 AM / in 21 days

Asia FX falters as dollar gains offset upbeat China news

(Reuters) - Asian currencies slipped on Monday as higher U.S. yields supported the dollar, offsetting data showing stronger-than-expected growth in China’s manufacturing sector.

FILE PHOTO: A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

The dollar index that tracks the greenback against a basket of rivals added 0.3 percent to 93.412 as at 0600 GMT.

Higher U.S Treasury yields helped bolster the greenback with the 10-year U.S. Treasuries yield rising to 2.360 percent in Asian trading compared to Friday’s U.S. close of 2.326 percent.[FRX/]

The Philadelphia Federal Reserve Bank President Patrick Harker said Friday he still has “penciled in” an interest rate hike in December, and three more rate hikes next year, in line with most of his colleagues at the central bank.

“That (Harker’s comments) was enough to keep the dollar relatively well bid, bond rates up, and expectations of a December hike elevated,” said Greg McKenna, chief market strategist at AxiTrader. Additionally, former Federal Reserve Governor Kevin Warsh, who is perceived to be more hawkish than Chair Janet Yellen, was approached by U.S. President Donald Trump for a potential nomination to head the U.S. central bank. The hawkish signals countinued last week with the Bank of England Governor Mark Carney saying that Britain’s economy was on track for the central bank to start raising interest rates in the “relatively near term.” The talk of stabilising and rising interest rates in the developed world could mean more selling of high-yielding emerging markets assets. The Philippine peso led the decliners in the region, posting its worst day in over six weeks.

The Thai baht inched lower after data showed that the country’s consumer price index rose for a third straight month in September, but was still below the central bank’s target.

The Singapore dollar also weakened against the dollar, shedding 0.3 percent. Regional currencies were little fazed by weekend official data showing China’s factories grew at the fastest pace in over five years, though Asian stock markets edged higher on the news. Analysts had expected slightly slower growth.

Also on Saturday, China’s central bank cut the amount of cash that some banks must hold as reserves for the first time since February 2016 in a bid to encourage more lending to struggling smaller firms and energize its lacklustre private sector.

But trading volumes across the region were thin, with markets in China, South Korea and India closed for holidays.

INDONESIAN RUPIAH

The Indonesia rupiah depreciated 0.4 percent against the dollar despite data showing annual inflation rate eased for a fourth month in September to its lowest since March on the back of a continued decline in food prices.

Annual headline consumer prices rose 3.72 percent in September, compared with a growth of 3.82 percent in August, the statistics bureau said on Monday. Analysts polled by Reuters had expected 3.67 percent.

“Although we expect inflation to remain benign, we still expect Bank of Indonesia to leave its policy rates unchanged for the remainder of the year, given rising external risks that still appear to be a key policy priority,” Nomura said in a note.

The central bank had surprised markets with back-to-back rate cuts in the last two months.

The following table shows rates for Asian currencies against the dollar at 0600 GMT.

CURRENCIES VS U.S. DOLLAR

Currency Latest bid Previous day Pct Move

Japan yen 112.89 112.47 -0.37

Sing dlr 1.3609 1.3572 -0.27

Taiwan dlr 30.404 30.305 -0.33

Baht 33.400 33.32 -0.24

Peso 51.060 50.815 -0.48

Rupiah 13525 13470 -0.41

Ringgit 4.230 4.219 -0.26

Change so far in 2017

Currency Latest bid End 2016 Pct Move

Japan yen 112.89 117.07 +3.70

Sing dlr 1.3609 1.4490 +6.47

Taiwan dlr 30.404 32.279 +6.17

Baht 33.400 35.80 +7.19

Peso 51.060 49.72 -2.62

Rupiah 13525 13470 -0.41

Ringgit 4.230 4.4845 +6.02

Reporting by Hanna Paul in Bengaluru; Editing by Kim Coghill

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