December 6, 2018 / 7:04 AM / 4 months ago

EM ASIA FX-Most Asian currencies drop on lower U.S. yields, growth worries

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    Dec 6 (Reuters) - Most Asian currencies were hit on Thursday
as the U.S. bond market signalled trouble ahead for the world's
biggest economy, while the arrest of a top executive of a
Chinese tech firm in Canada for extradition to the United States
shook risk markets.
    An inversion of the U.S. yield curve, with the two-year
yields moving above the five-year rates, has prompted recession
worries and rattled global riskier assets. 
    There has also been a flattening of the curve further out,
as spreads between two- and 10-year U.S. Treasury yields
tightened towards their narrowest in more than a decade on
    While few expect the U.S. economy to slow sharply anytime
soon, an inverted yield curve has stoked fears of a recession
down the road. Historically, the economy has taken anywhere
between 12 months and 24 months to fall into a recession when
the yield curve inverts.
    Leong Sook Mei, ASEAN head of global markets research at
MUFG Bank, said the moves in U.S. bond yields will affect global
equities and impact Asian currencies as well. 
    She noted that Asia is vulnerable to any U.S. slowdown as
many of the economies rely heavily on the United States for
    "Asian currencies will definitely be affected, if the U.S.
yield curve is inverted. It will come on top of the trade war
concerns," said Mei.
    Moreover, the arrest of a top executive of Chinese tech
giant Huawei Technologies fanned fears of a fresh flare-up in
tensions between China and the United States.
    The arrest comes at a particularly tricky time after U.S.
President Donald Trump and his Chinese counterpart Xi Jinping
reached a temporary truce in their trade war in a weekend
meeting in Argentina.  
    "Trump's threat that he is a "tariff man" should China
refuse to comply with US trade demands, alongside the arrest of
a high level Huawei executive, raises fear that the positivity
from the Trump-Xi summit may unwind," said Wei Liang Chang, an
FX strategist at Mizuho Bank.
    The Indonesian rupiah led the regional declines,
shedding more than 1 percent, while the Indian rupee fell
0.7 percent. 
     India's central bank kept interest rates unchanged on
Wednesday, as expected, on easing inflation worries and in
efforts to persuade banks to lend more to support an economy
that has lost some momentum.
     The South Korean won, Thai baht,
Malaysian ringgit and China's yuan, all shed
more than a quarter percent each on Thursday.
    The Indonesian rupiah dropped more than 1 percent
against the dollar, hurt by a slump in its bond and equity
    Indonesia's central bank intervened in the domestic
non-deliverable forward (NDF) market on the day,
to support the rupiah, Bank Indonesia's (BI) head of monetary
management Nanang Hendarsah said.
    Last week, its central bank said it viewed the rupiah as
still undervalued.
    The rupiah has fallen 6.7 percent this year, and is the
second worst performer in the region after the Indian rupee. 
    The following table shows rates for Asian currencies against
the dollar at 0610 GMT.
   Change as of  0610                           
  Currency               Latest  Previous    Pct
                            bid       day   Move
  Japan yen             112.790    113.19  +0.35
  Sing dlr              1.370      1.3668  -0.26
  Taiwan dlr            30.848     30.806  -0.14
  Korean won            1118.60    1114.1  -0.40
  Baht                  32.820       32.7  -0.37
  Peso                  52.690      52.74  +0.09
  Rupiah                14548.0     14390  -1.09
  Rupee                 71.010      70.46  -0.77
  Ringgit               4.165      4.1525  -0.30
  Yuan                  6.877      6.8580  -0.27
  Change so far in                              
  Currency              Latest   End 2017    Pct
                        bid                 Move
  Japan yen             112.790    112.67  -0.11
  Sing dlr              1.370      1.3373  -2.42
  Taiwan dlr            30.848     29.848  -3.24
  Korean won            1118.60   1070.50  -4.30
  Baht                  32.820      32.58  -0.73
  Peso                  52.690      49.93  -5.24
  Rupiah                14548.0     13565  -6.76
  Rupee                 71.010      63.87  -10.0
  Ringgit               4.165      4.0440  -2.91
  Yuan                  6.877      6.5069  -5.38
 (Reporting by Patturaja Murugaboopathy in Bengaluru
Editing by Shri Navaratnam)
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