Asian currencies fall as rising US bond yields support US dollar

Thailand's baht is down 0.4 per cent with the central bank expected to leave interest rates at a near record low tomorrow (May 16). — AFP pic
Thailand's baht is down 0.4 per cent with the central bank expected to leave interest rates at a near record low tomorrow (May 16). — AFP pic

SINGAPORE, May 15 — Asian currencies weakened today with the South Korean won and Indonesian rupiah falling the most, as easing trade tensions helped shore up the US dollar and push up US bond yields.

The US dollar index against a basket of six major currencies edged up 0.2 per cent to 92.792 at 0502 GMT.

The US 10-year bond yield had inched higher yesterday, as optimism over President Donald Trump's pledge to aid China's ZTE Corp helped assuage US-China trade frictions.

“It appears that momentum for earnest trade negotiations has been unlocked and we think this could be a positive for global market sentiment and the US dollar for now,” said Mizuho Bank in a note.

Indonesia's rupiah weakened to 14,030 a US dollar. Its loss for the day increased slightly after South-east Asia's largest economy reported that in April it had its biggest trade deficit in four years.

The data showed a trade deficit of US$1.62 billion (RM6.4 billion) in April which conflicted with most estimates, including a Reuters poll, and was a departure from a US$1.12 billion surplus in March.

The rupiah remains perched around two-and-a-half-year lows.

Thailand's baht fell 0.4 per cent. The central bank will leave interest rates at a near record low tomorrow, a Reuters poll showed.

The Philippine peso fell 0.4 per cent to 52.677 to the US dollar, its lowest level in nearly 12 years.

The South Korean won declined 0.7 per cent, ahead of revised April trade data later in the day.

Chinese yuan

The Chinese yuan slipped to 6.349 a US dollar, following a slew of economic data, which showed China's industrial output grew 7 per cent in April, quicker than expected, while retail sales missed expectations.

Moody's maintained a cautionary tone on the recent trade discussion between the world's two largest economics, saying China is "unlikely to meet US demands on bilateral trade."

Caution was echoed by the US Ambassador to China Terry Branstad, who says the countries are still “very far apart” on resolving trade frictions.

Indian rupee

The Indian rupee inched down to its lowest in over three months, following data that showed annual retail and wholesale inflation accelerated in April, with many economists expecting a more hawkish central bank at June's policy meeting.

Annual retail inflation accelerated in April to 4.58 per cent, after easing for three straight months, mainly driven by faster increases in food and fuel prices.

The biggest risk Asia's third-largest economy faces is rising crude oil prices. India meets 80 per cent of its oil needs from imports.

An increase in oil prices of US$10 a barrel could quicken inflation by about 1 percentage point and reduce economic growth by 0.2 to 0.3 percentage points, a senior finance ministry official told Reuters. — Reuters