December 3, 2018 / 6:57 AM / 6 months ago

EM ASIA FX-Asian currencies gain on Sino-U.S. trade truce

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    Dec 3 (Reuters) - Most Asian currencies rallied on Monday,
as a halt to further tariff escalation between the United States
and China lifted investor risk appetites, with the Korean won
leading gains. 
    The world's two largest economies agreed in a meeting in
Argentina on the weekend to a 90-day truce to their trade war.

    "The weekend U.S.-China meeting yielded the best outcome
that we had hoped for. Although some optimism had been built in
the price in the run-up to the meeting, risk assets are still
likely to rally further during the early part of this week,"
said Frances Cheung, head of macro at Westpac.
     "However, this is better seen as a temporary truce, while
structural issues surrounding U.S.-China trade relations have
not been resolved yet."
     The White House said on Saturday President Donald Trump
told Chinese President Xi Jinping that he would not boost
tariffs on $200 billion of Chinese goods to 25 percent on Jan. 1
as previously announced.
    Beijing for its part agreed to buy an unspecified but "very
substantial" amount of agricultural, energy, industrial and
other products.
    The trade war between the United States and China has
battered Asian currencies this year, as most economies in the
region depend on export revenues and form a major part of the
regional supply chain for Chinese shipments. 
     The South Korean won led regional currencies'
gains on the day with a rise of 0.7 percent against the dollar.
The won has fallen over 4 percent this year due to the impact of
trade frictions as South Korea is a major trading partner of
both the United States and China.
    China's yuan advanced 0.6 percent against the
dollar and was the second best performer on the day. 
     Ken Cheung, senior Asian FX strategist at Mizuho in Hong
Kong said the renminibi was unlikely to breach the 7 per dollar
level within this year.
     "If renminibi breaks 7, it will create some panic selling
in the Asian markets. Right now, I think we see this kind of
risk has been largely removed at this moment," said Cheung.
    The Indonesian rupiah rose 0.5 percent, while the
Thai baht, Taiwan dollar and the Malaysian
ringgit all, advanced about 0.25 percent each on the day.
    However, some analysts worry that the relief is temporary.
    "We expect a long-drawn negotiation process in 2019 but
there is still a significant risk that both sides could fail to
overcome their differences," UOB analysts said in a report.
    The Indian rupee was down 0.6 percent, in contrast
to solid gains in other regional currencies. 
    The rupee's loss was due to a sharp rise in crude oil prices
and the country's slower economic growth in the July-September
    India's economy grew a lower-than-expected 7.1 percent in
the July-September quarter from a more than two-year high of 8.2
percent in the previous quarter,  data showed on Friday.
    The Indian rupee is Asia's worst performer this year, with a
decline of 8.8 percent against the dollar.  
    The Indonesian rupiah rose 0.4 percent, despite
comments from President Joko Widodo that Indonesia needs a
stronger dollar to boost exports.
    On Friday, Bank Indonesia said it sees the rupiah as still
    The rupiah gained more than 6 percent in November and it
also broke past its 200-day moving average at the end of last
week, considered a bullish sign. 
    The following table shows rates for Asian currencies against
the dollar at 0606 GMT.

   Change as of  0606                           
  Currency               Latest  Previous    Pct
                            bid       day   Move
  Japan yen             113.500    113.46  -0.04
  Sing dlr              1.367      1.3719  +0.37
  Taiwan dlr            30.749     30.850  +0.33
  Korean won            1111.60    1121.2  +0.86
  Baht                  32.790      32.89  +0.30
  Peso                  52.340      52.45  +0.21
  Rupiah                14225.0     14300  +0.53
  Rupee                 70.035      69.59  -0.64
  Ringgit               4.170       4.182  +0.29
  Yuan                  6.907      6.9590  +0.75
  Change so far in                              
  Currency              Latest   End 2017    Pct
                        bid                 Move
  Japan yen             113.500    112.67  -0.73
  Sing dlr              1.367      1.3373  -2.17
  Taiwan dlr            30.749     29.848  -2.93
  Korean won            1111.60   1070.50  -3.70
  Baht                  32.790      32.58  -0.64
  Peso                  52.340      49.93  -4.60
  Rupiah                14225.0     13565  -4.64
  Rupee                 70.035      63.87  -8.80
  Ringgit               4.170      4.0440  -3.02
  Yuan                  6.907      6.5069  -5.79
 (Additional reporting by Gaurav Dogra in Bengaluru 
Editing by Jacqueline Wong)
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