September 24, 2018 / 5:14 AM / 7 months ago

EM ASIA FX-Asian currencies come under pressure as China cancels trade talks

    * Eyes on escalating trade tensions, as latest round of
take affect
    * Central bank meetings awaited 
    * Markets in Taiwan, China and South Korea closed for

 (Adds text, updates prices)
    By Nikhil Nainan
    Sept 24 (Reuters) - Asian currencies were weaker across the
board on Monday as investors faced the prospect of an escalation
in the Sino-U.S. trade conflict after China cancelled upcoming
talks even as the latest round of tariffs take effect.
    China cancelled mid-level trade talks with the United
States, the Wall Street Journal reported. With no compromise in
sight, many expect the latest move will only raise the tension
between the world's two largest economies.

    U.S. tariffs on $200 billion worth of Chinese goods and
retaliatory tariffs by Beijing on $60 billion worth of U.S.
products took effect on Monday.
    With Beijing's stance appearing to have hardened, U.S.
President Donald Trump's threat of tariffs on all remaining $267
billion of Chinese exports to the United States looks more like
becoming a reality.
    "So, 'no talk' and 'more (negative trade) action' is now the
growing risk and emerging market Asia FX (and wider assets)
markets could be pushed into defensive mode all over again as
pressures mount with the re-escalation in trade war risks," 
Mizuho Bank said in a note.
    This week promises to be critical for the region's
currencies, with the U.S. Federal Reserve widely expected to
raise rates on Wednesday.
    Several regional central banks are expected to raise their
own rates to defend their respective currencies. 
    Indonesia's rupiah weakened 0.3 percent to 14,865 per
dollar ahead of a Bank of Indonesia meeting set for Thursday. 
    Similarly, the Bangko Sentral ng Pilipinas (BSP) is also
meeting on Thursday to decide rates, with the peso
slipping 0.2 percent to 54.21, lingering around its weakest
level against the dollar since late 2005. 
    With the Fed rate hike priced in by many, Mizuho and OCBC
bank both predict BSP will raise rates by 50 basis points, while
Bank Indonesia is seen hiking its policy rate 25 basis points. 
    Stephen Innes, head of trading Asia for Oanda, cautioned the
hawkish plays, "without addressing the real underlying problems
around deficits, hiking interest rates to prop up currency is
like putting a band-aid on a broken leg. Speculators will
continue to target deficit currencies at every opportunity."
    A Reuters poll on Sept. 20 showed investors remained bearish
on Asian currencies, expecting a stronger dollar and trade
tensions to pile on pressure.
    The Singapore dollar eased 0.2 percent to 1.366
against the greenback, with annual core inflation in August at
1.9 percent, slightly below forecast and unchanged from July.

    Markets in China, South Korea and Taiwan were closed for
    The rupee dropped 0.3 percent to 72.42, after a
volatile session on Friday as liquidity concerns over India's
non-bank finance companies spooked markets.
    The Reserve Bank of India and market regulator Securities
and Exchange Board of India said they were ready to step in to
calm markets. 
    Rising oil prices weeks ahead of planned U.S. sanctions on
Iran also added pressure on the rupee, which has lost about 12
percent of its value against the U.S. dollar, and hit successive
record lows over the last few weeks.
 Change on the day at 0442 GMT                          
 Currency                     Latest bid  Previous day  Pct Move
 Japan yen                    112.590     112.56        -0.03
 Sing dlr                     1.366       1.3640        -0.15
 Baht                         32.450      32.37         -0.25
 Peso                         54.210      54.123        -0.16
 Rupiah                       14865.000   14816         -0.33
 Rupee                        72.420      72.20         -0.31
 Ringgit                      4.132       4.128         -0.10
 Change so far in 2018                                  
 Currency                     Latest bid  End 2017      Pct Move
 Japan yen                    112.590     112.67        +0.07
 Sing dlr                     1.366       1.3373        -2.11
 Taiwan dlr                   30.716      29.848        -2.83
 Korean won                   1115.300    1070.50       -4.02
 Baht                         32.450      32.58         +0.40
 Peso                         54.210      49.977        -7.81
 Rupiah                       14865.000   13565         -8.75
 Rupee                        72.420      63.87         -11.81
 Ringgit                      4.132       4.0440        -2.13
 Yuan                         6.860       6.5069        -5.15

 (Reporting by Nikhil Kurian Nainan in Bengaluru; editing by
Eric Meijer)
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