August 5, 2019 / 5:56 AM / in 13 days

EM ASIA FX-Tumble by China's yuan sends most Asian currencies into a tailspin

    * U.S.-China trade war escalates, making investors seek
    * Markets worry whether currency is the trade dispute's new
    * South Korea's won badly affected amid spat with Japan 

 (Adds context on yuan falling below key level, updates prices)
    By Nikhil Nainan
    Aug 5 (Reuters) - Currencies across Asia suffered sharp
losses on Monday as China's yuan crossed the 7 per dollar level
for the first time in over a decade, following escalation of the
Sino-U.S. trade war to new heights.
    The yuan sank nearly 1.5% to 7.042, breaching the
key level for the first time since the global financial crisis
in 2008. The closely-managed currency's move lower sets the
stage potentially for a new front in the trade dispute.
    The People's Bank of China "has effectively weaponised the
exchange rate, even if it is not proactively weakening the
currency with direct FX intervention," Julian Evans-Pritchard,
Capital Economics senior China economist said in a note.
    The build-up of hostilities comes after U.S. President
Donald Trump late last week declared he would slap 10% tariffs
on $300 billion in Chinese imports, ending a month-long trade
    "We had anticipated that the PBOC would eventually devalue
the currency in response to trade tensions but hadn't expected
it to come quite this soon," Evans-Pritchard added. 
    Uncertainty engulfed Asian markets in general on Monday,
with flows moving to safer bets, with the Japanese yen
strengthening 0.6%.
    Chris Weston, head of research at Pepperstone brokerage in
Australia, said in a note the market "really does not need
worries about a capital flight in China at this point in time
and a subsequent tightening of financial conditions in the
Chinese economy".
    Trade-reliant economies such as South Korea took major hits
on Monday. The won touched a three-year low of
1,218.3 per dollar, while the Taiwan dollar dropped
    Also weighing on the won is its diplomatic spat with Japan,
which tightened controls in July on exports to South Korea. This
escalated a row over wartime forced labourers and sparking a
boycott by South Korean consumers of Japanese products and
    "The South Korean won is least favoured because of its
country's spat with Japan over the latter's export ban," DBS
said in a note. 
    India's rupee also fell to its weakest level since
early March, ahead of a central bank meeting on Wednesday, at
which DBS expects a 25 basis point rate cut. 
    Indonesia reported its weakest economic growth in two years
in April-June, though the 5.05% figure matched market forecasts
and did not move the rupiah, which was 0.7% lower at
14,270 to the dollar for the day.
    The Thai and Philippine central banks  have policy meetings
this week amid a global easing wave as growth falters. 
    Thailand's baht, the strongest Asian currency this
year, was marginally lower while the Philippine peso
dropped 0.4% to 51.84 a dollar.

 Change on the day at 0459 GMT                    
 Currency               Latest bid  Previous day  Pct Move
 Japan yen              106.020     106.58        +0.53
 Sing dlr               1.382       1.3765        -0.41
 Taiwan dlr             31.609      31.376        -0.74
 Korean won             1214.000    1198          -1.32
 Baht                   30.840      30.8          -0.13
 Peso                   51.840      51.64         -0.39
 Rupiah                 14270.000   14175         -0.67
 Rupee                  70.425      69.59         -1.19
 Ringgit                4.173       4.155         -0.43
 Yuan                   7.029       6.9420        -1.24
 Change so far in 2019                            
 Currency               Latest bid  End 2018      Pct Move
 Japan yen              106.020     109.56        +3.34
 Sing dlr               1.382       1.3627        -1.41
 Taiwan dlr             31.609      30.733        -2.77
 Korean won             1214.000    1115.70       -8.10
 Baht                   30.840      32.55         +5.54
 Peso                   51.840      52.47         +1.22
 Rupiah                 14270.000   14375         +0.74
 Rupee                  70.425      69.77         -0.93
 Ringgit                4.173       4.1300        -1.03
 Yuan                   7.029       6.8730        -2.22
 (Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by
Richard Borsuk)
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