September 25, 2017 / 6:10 AM / 9 months ago

EM ASIA FX-Asian currencies tread water, fret over Fed rate outlook, N.Korea

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    Sept 25 (Reuters) - Most Asian currencies were little
changed on Monday as investors weighed the odds of another U.S.
interest rate hike this year and remained cautious over tensions
with North Korea.
    The U.S. Federal Reserve left interest rates unchanged on
last week but signaled it still expects one more increase by the
end of the year despite a recent bout of low inflation.

    The dollar index which tracks the greenback against
six major currencies, was up 0.1 percent at 92.243.
    "The reason for caution in Asian currencies is
understandable. For the third straight year, the FOMC meeting in
September signalled a rate hike for December, right after
markets turned dovish on the Fed," said Philip Wee, senior
currency economist for DBS Bank.
    "Last year, we had the 'Trump rally' into the December hike.
This year, we have the Fed starting the unwinding of its balance
    The dollar-rupee pair breached past 65 level and the
dollar-rupiah pair climbed above 13,300 level, since the Fed
    Chang Wei Liang, FX strategist at Mizuho Bank, said S&P's 
downgrade of both China and Hong Kong late last week also added
to the cautious mood in Asia.
    S&P Global Ratings downgraded China's sovereign credit
rating on Thursday, saying the country's attempts to reduce
risks from its rapid buildup in debt are not working as quickly
as expected.
    A weaker fixing of the official yuan midpoint by
China's central bank countributed to a quarter percent fall in
the yuan on Monday to near four-month lows, though
traders do not think it will be allowed to slip much more ahead
of the highly sensitive Communist Party Congress in
    The Singapore dollar also slipped after the country's
consumer price index rose less than expected in August.

    "With inflationary pressure remaining benign and well with
in comfort zone of the central bank, the authority will most
likely stand pat, maintaining the current zero appreciation of
the SGD NEER policy stance, in the upcoming October review," DBS
said in a note.
    The South Korean won and the Philippine peso
 led regional gains on the day. Analysts said M&A
related inflows supported the peso against the dollar.

    The Indian rupee was up 0.05 percent at 64.7600 per
    Having fallen about 0.7 percent since the Fed's meeting, the
rupee is the biggest decliner among Asian currencies in that
    Analysts said the rupee will continue to decline in the near
term due to its deteriorating current account and fiscal
    India's current account deficit widened to a four-year high
of $14.3 billion in the June quarter, according to the central
bank data.
    India's government is considering a plan to loosen its
fiscal deficit target to enable it to spend up to 500 billion
rupees ($7.7 billion) more to halt an economic slowdown, two
government officials with direct knowledge of the plan said on
    "The fiscal deficit is a cause of concern," said Mizuho
Bank's Liang.
    "If the fiscal deficit deteriorates, then RBI will probably
not have as much room to ease, on fears of inflation pressures
being revived."
    The following table shows rates for Asian currencies against
the dollar at 0538 GMT.

   Change on the                                        
  day at   0538                              
  Currency          Latest bid     Previous     Pct Move
  Japan yen        112.23            111.97        -0.23
  Sing dlr         1.3465            1.3455        -0.07
  Taiwan dlr       30.168            30.191        +0.08
  Korean won       1130              1136.5        +0.56
  Baht             33.079              33.1        +0.06
  Peso             50.630            50.725        +0.19
  Rupiah           13300              13310        +0.08
  Rupee            64.78              64.79        +0.01
  Ringgit          4.191              4.196        +0.12
  Yuan             6.605             6.5890        -0.24
  Change so far                                         
 in 2017                                     
  Currency         Latest bid   End 2016        Pct Move
  Japan yen        112.23            117.07        +4.31
  Sing dlr         1.3465            1.4490        +7.61
  Taiwan dlr       30.168            32.279        +7.00
  Korean won       1130             1207.70        +6.86
  Baht             33.079             35.80        +8.23
  Peso             50.630             49.72        -1.80
  Rupiah           13300              13470        +1.28
  Rupee            64.783             67.92        +4.84
  Ringgit          4.191             4.4845        +7.00
  Yuan             6.605             6.9467        +5.17
 (Reporting by Patturaja Murugaboopathy in Bengaluru; Editing by
Kim Coghill)
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