December 4, 2018 / 6:19 AM / 7 months ago

EM ASIA FX-Rally in Asian FX slows as markets reassess Sino-US trade truce

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    Dec 4 (Reuters) - The Chinese yuan led most Asian currencies
higher on Tuesday, though a prior day rally sparked by the
temporary U.S.-China trade truce slowed on questions over
whether the two sides can strike a durable deal.
    Rising crude oil prices also undermined currencies of key
energy importers in the region.
    While markets initially applauded the U.S.-China trade
truce, the lack of specificity in the temporary agreement struck
between presidents Donald Trump and Xi Jinping over the weekend
in Argentina has raised concerns about the fragility of the
    "Details of the weekend Xi-Trump dinner remain scant from
Beijing and the White House. Even within the US administration,
we are seeing different interpretations, and attempts to dial
back on the expectations of the outcome," said Terence Wu,
currency strategist at OCBC Bank.
    "Markets now run the risk of China eventually not
corroborating the declarations from the US front, and may now be
moderating the optimism it drew from the Xi-Trump outcome."
     The South Korean won tacked on just 0.2 percent,
compared with its near 1 percent gain on Monday, while the
Taiwan dollar and the Singapore dollar also
inched higher. 
    Global crude oil prices rose for the second
successive day on Tuesday and weighed on the Indonesian rupiah
, Indian rupee and the Philippine peso
 - the currencies of three major importers of oil in
     Outperforming its regional peers, China's yuan
advanced 0.7 percent against the dollar, while the Malaysian
ringgit also climbed higher.
    Meanwhile, foreigner investors have accelerated their buying
 in Asian equities this month, data from regional exchanges
showed. They purchased $ 511 million worth of equities in
Philippines, Thai, Vietnam, Indonesian, Indian and South Korean
markets on Monday, adding to their total purchases of $2.5
billion in November.   
    "We are still favourable on Asian currencies as a whole into
the year end, on a strong portfolio inflow momentum, low crude
prices and positive sentiments towards EM Asia," said OCBC's Wu.
    "We expect the Korean won and Taiwan dollar to mirror the
yuan movements, while the Indonesian rupiah and Indian rupee 
may continue to outperform as they remain more attractive in
real yield terms."    
     The dollar index fell nearly quarter of percent on
the day due to a slump in U.S. Treasury yields.
    The yield spread between the U.S. 2-year and 10-year, which
is seen as predictor of a U.S. recession, tightened to its
smallest since July 2007.
    However, Saktiandi Supaat, head of FX research at Maybank
said such worries are overblown as the 2-year-10-year spread is
still in positive territory. 
    The following table shows rates for Asian currencies against
the dollar at 0528 GMT.
   Change as of  0528                           
  Currency               Latest  Previous    Pct
                            bid       day   Move
  Japan yen             113.060    113.65  +0.52
  Sing dlr              1.365      1.3668  +0.14
  Taiwan dlr            30.696     30.752  +0.18
  Korean won            1107.70    1110.7  +0.27
  Baht                  32.700      32.76  +0.18
  Peso                  52.505      52.32  -0.35
  Rupiah                14275.0     14235  -0.28
  Rupee                 70.405      70.45  +0.06
  Ringgit               4.149       4.163  +0.34
  Yuan                  6.841      6.8855  +0.65
  Change so far in                              
  Currency              Latest   End 2017    Pct
                        bid                 Move
  Japan yen             113.060    112.67  -0.34
  Sing dlr              1.365      1.3373  -2.02
  Taiwan dlr            30.696     29.848  -2.76
  Korean won            1107.70   1070.50  -3.36
  Baht                  32.700      32.58  -0.37
  Peso                  52.505      49.93  -4.90
  Rupiah                14275.0     13565  -4.97
  Rupee                 70.405      63.87  -9.28
  Ringgit               4.149      4.0440  -2.53
  Yuan                  6.841      6.5069  -4.89
 (Reporting by Patturaja Murugaboopathy in Bengaluru; Additional
Reporting by Gaurav Dogra 
Editing by Shri Navaratnam)
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