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|13 September, 2018

Most Asian currencies gain on hopes of U.S.-China trade progress, supports yuan

China's yuan jumped on the news of resumed trade talks, up 0.3% and near its strongest level against the dollar in a week

A China yuan note is seen in this illustration photo May 31, 2017.

A China yuan note is seen in this illustration photo May 31, 2017.

REUTERS/Thomas White

The Trump administration's invitation to China for a new round of trade talks supported almost all Asian currencies on Thursday, raising some optimism that a deal could avoid tariffs and defuse U.S.-China tensions.

Senior U.S. officials in the Trump administration invited their Chinese counterparts to restart bilateral trade talks on Wednesday, ahead of the imposition of tariffs on $200 billion worth of Chinese goods. 

"The big boost for markets was arguably derived from the silver linings of the storm clouds of trade wars," Mizuho Bank said in a note.

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However, Tai Hui, chief market strategist for JP Morgan Asset Management, said in a morning note, "while we agree this should provide short-term relief, the road ahead can still be tricky".

Sino-U.S. trade tensions have hammered riskier assets globally in recent months as policy makers and investors worried about the impact of trade disruptions on the world economy.

China's yuan jumped on the news of resumed trade talks, up 0.3 percent and near its strongest level against the dollar in a week.

It was also supported by the People's Bank of China (PBOC) setting the yuan's midpoint at 6.8488 per dollar.

The yuan last stood at 6.848 per dollar.

The Thai baht gained 0.4 percent to 32.640, even though Thailand's finance minister had said there was no need to increase interest rates at the moment.

The central bank is expected to meet on September 19, and some analysts expect a rate hike, which would be the first since 2011.

OCBC Bank said in a note, "second quarter GDP (was) firmer than expected; Bank of Thailand striking a new hawkish tone should provide support."

A widely anticipated rate hike from the Turkish central bank's policy meeting on Thursday is seen as a demonstration of the bank's intent to shore up the lira and would likely reduce fears of contagion amid a emerging market rout.

"Expect markets to continue to look to news flow (and potential contagion) out of the emerging market complex, with the Turkish central bank expected to hike rates today," OCBC said. Rate hike predictions ranged between 225 to 725 basis points.

The Philippine peso climbed 0.2 percent to 53.975 per dollar, while Indonesia's rupiah was around 14,825 and showing only small moves.

Markets in India were closed for a public holiday, with the rupee getting some respite from a volatile week that saw it touch multiple record lows and appreciate sharply on Wednesday.

SOUTH KOREAN WON

The won KRW=KFTC sharply rose on Thursday, at one point gaining as much 0.9 percent to 1,118.1, its strongest level against the dollar in a week.

The won took strength from comments by Prime Minister Lee Nak-yeon who suggested it was time to discuss raising interest rates.

A senior government official said soon after that Lee's comments did not aim to suggest any monetary policy direction. South Korea's won slipped back slightly although it was still 0.6 percent stronger at 1,122.4 against the dollar.

(Reporting by Nikhil Kurian Nainan in Bengaluru; editing by Eric Meijer) ((NikhilKurian.Nainan@thomsonreuters.com; +91 806 749 1637; Reuters Messaging: nikhilkurian.nainan.thomsonreuters.com@reuters.net))