October 18, 2018 / 6:52 AM / 7 months ago

EM ASIA FX-Asian currencies slide on hawkish Fed minutes; yuan hits 21-month low

    * Fed minutes weigh on EM currencies
    * S.Korean won top loser
    * Investors await China GDP data

 (Adds details on won, yuan and rupiah, updates prices)
    By Sumeet Gaikwad
    Oct 18 (Reuters) - Asian currencies slipped against the
dollar on Thursday as hawkish Federal Reserve minutes reinforced
expectations for more rate hikes, heightening concerns about the
widening interest rate spread between the United States and
emerging markets.
    South Korea's won led declines and the yuan weakened to
levels last seen in January 2017.
    The minutes from the Fed's Sept. 25-26 meeting showed every
Fed policymaker backed raising interest rates and also generally
agreed borrowing costs were set to rise further, despite U.S.
President Donald Trump's view that the tightening have already
gone too far.
     Emerging economies have been playing catch-up with rising
U.S. interest rates this year, deferring investments and slowing
growth as dollar-denominated debts become harder to pay.
    "If this situation of rising long-end Treasury yields and a
firmer dollar persists, emerging markets could find it hard to
bear," Mizuho Bank said in a note.  
    The South Korean won was the biggest loser in the
region, falling 0.59 percent at 1,133.20 against the dollar.
    The Chinese yuan was off 0.19 percent at 6.936
against the dollar, its weakest in nearly two years.
    The People's Bank of China (PBOC) set Thursday's official
midpoint fix at 6.9275, its weakest since January 2017.
    A steep overnight drop in global oil prices cushioned the
fall of the Indonesian rupiah, which declined 0.26
percent against the dollar. 
    Meanwhile, the Japanese yen, largely considered a
safe-haven currency, strengthened 0.12 percent.
    Indian financial markets were closed for a holiday.

    WON TAKES A BEATING
    South Korea's central bank kept monetary policy steady for a
seventh straight month on Thursday, but flagged concerns about
mounting household debt and financial stability, suggesting it
could look at a rate hike as soon as November.
    However, while some saw the meeting as hawkish, the Bank of
Korea's downgrade of its gross domestic product growth forecasts
for this year amid trade war concerns and declining exports was
of some concern.
    "It (central bank) is trying to balance both sides of risk
as the economy has been improving but at the same time the
outlook is still queasy because of trade war risk," said Sim Moh
Siong, FX strategist at Bank of Singapore.
    A tit-for-tat trade war has left South Korea's export sector
vulnerable, with shipments declining 8.2 percent in September
from a year earlier, their biggest drop in over two years.

    
    YUAN WEAKENS
    The yuan has lost over 6 percent this year, and is poised to
post a fifth straight session of declines as a strong dollar and
China growth concerns hurt risk appetite. 
    Investors awaited China gross domestic product data due on
Friday for clues on the effects of the ongoing trade war on the
wider economy. 
    "If the PBOC is passive then there is a likelihood you could
get a negative feedback loop in terms of market pushing the
dollar stronger against Asian currencies," said Sim at Bank of
Singapore.
     The U.S. government refrained from naming China or any
other trading partner as a currency manipulator in the
semi-annual FX report, as it leans on import tariffs to try to
cut a trade deficit with China.
    A falling yuan will exacerbate the trade surplus China has
with the U.S.
    
    The following table shows rates for Asian currencies against
the dollar at 0526 GMT.
    CURRENCIES VS U.S. DOLLAR
 Change on the day at   0526 GMT                        
 Currency                     Latest bid  Previous day  Pct Move
 Japan yen                    112.500     112.64        +0.12
 Sing dlr                     1.378       1.3780        -0.02
 Taiwan dlr                   30.942      30.850        -0.30
 Korean won                   1133.200    1126.5        -0.59
 Baht                         32.590      32.51         -0.25
 Peso                         53.940      53.89         -0.09
 Rupiah                       15190.000   15150         -0.26
 Ringgit                      4.154       4.149         -0.12
 Yuan                         6.936       6.9235        -0.19
                                                        
 Change so far in 2018                                  
 Currency                     Latest bid  End 2017      Pct Move
 Japan yen                    112.500     112.67        +0.15
 Sing dlr                     1.378       1.3373        -2.97
 Taiwan dlr                   30.942      29.848        -3.54
 Korean won                   1133.200    1070.50       -5.53
 Baht                         32.590      32.58         -0.03
 Peso                         53.940      49.93         -7.43
 Rupiah                       15190.000   13565         -10.70
 Ringgit                      4.154       4.0440        -2.65
 Yuan                         6.936       6.5069        -6.19
 
 (Reporting by Sumeet Gaikwad in Bengaluru; Editing by Sam
Holmes)
  
 
 
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