Most Asian currencies inch down as US dollar gains on funding bill

China's yuan inches lower against the US dollar, reflecting the greenback's strength in global markets. — File pic
China's yuan inches lower against the US dollar, reflecting the greenback's strength in global markets. — File pic

SINGAPORE, Dec 8 — Most emerging Asian currencies traded flat to marginally easier today as the US dollar gained on the passage of a bill to temporarily extend US government funding, raising investors' optimism that a tax reform bill would also pass.

The US Congress passed legislation funding the government through Dec 22, averting a shutdown of agencies that would have been triggered at midnight today. Congress and President Trump will now have to come up with a deal to keep the government operating beyond Dec 22.

The US dollar index, which gauges the greenback against a basket of six major rivals, was steady on the day and up 1 per cent for the week.

“We are expecting seasonal US dollar liquidity tightening due to reduced liquidity over the holiday season. That should feedback towards a firmer dollar and hence softer Asian FX,” said Peter Chia, FX strategist for United Overseas Bank in Singapore.

Investors were keeping a close watch for US non-farm payrolls data due later in the day.

Their focus was also on how many more interest rate hikes to expect in 2018, as the Federal Reserve funds futures were pricing in a rate hike at the central bank's Dec 12-13 meeting.

China's yuan and the Thai baht led declines among emerging Asia currencies. Both lost one per cent, although the baht was on track to post its first weekly gain in six.

The yuan remained little changed by data that showed the country's exports and imports unexpectedly accelerated last month after slowing in October.

The Singapore dollar, the Malaysian ringgit and Indonesia's rupiah all traded flat, while the Philippine peso and the Indian rupee inched up 0.3 per cent and 0.1 per cent, respectively.

“All the bad news about the peso is probably already in the price. Naturally, we can expect opportunistic investors coming in to pick up the peso which has not participated in the Asian FX rally this year,” said Chia.

Christopher Wong, an FX strategist with Malayan Banking Berhad, attributed the Indian rupee's gain to investor expectations of good result for Prime Minister Narendra Modi's ruling party in the upcoming Gujarat state elections.

“We believe the BJP's NDA coalition is likely to remain in power in the state on the back of the popularity of PM Modi and prudent policies, but we still expect to see some volatility as counting will likely to go on till Dec 18 or so,” Wong said.

China's yuan

The Chinese yuan inched lower against the US dollar on Friday, reflecting the greenback's strength in global markets.

The yuan, which is set to finish the week on a flat note, was the biggest loser among emerging Asian currencies for the day.

Prior to the market opening today, the People's Bank of China (PBOC) set the midpoint rate lower for the 10th straight day at 6.6218 per US dollar, weaker than the previous fix of 6.6195.

The yuan opened at 6.6180 per dollar and was changing hands at 6.6178 at midday, 38 pips weaker than the previous late session close. — Reuters

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