Most emerging Asian currencies eased on Wednesday, pressured by a fall in global oil prices, while the Indian rupee was little changed despite expectations that the country's central bank will cut interest rates later in the day. With inflation cooling sharply, a majority of economists surveyed by Reuters expect the Reserve Bank of India to cut its repo rate by 25 basis points to 6.00 percent later in the day (0900 GMT).
But the RBI has surprised markets several times in recent months. The Malaysian ringgit weakened for a fourth session as oil prices skidded. Rising US fuel inventories pulled US crude back below $50 per barrel on Wednesday, adding to pressure from high supplies from producer club Opec.
Malaysia is one of the biggest oil and natural gas exporters in Asia. The Indonesian rupiah slipped to its lowest in a week. "It is more of a sentiment issue," said Qi Gao, Asia FX Strategist at Scotiabank, referring to the effect of oil prices on Asian currencies.
Meanwhile, the yuan pulled back, ending a four-day winning streak. Caution prevailed after reports that US President Donald Trump was close to a decision on how to respond to what he considers China's unfair trade practices. "President Trump is said to be drafting a set of economic measures...to punish China for the perceived inaction on North Korea." said Andy Ji, currency strategist at Commonwealth Bank of Australia.
"In the past, the Chinese currency typically sprang into crisis mode, namely a harder US dollar peg and even more stringent capital account restrictions." he added. Among other currencies, the South Korean won Singapore dollar and Philippine peso drifted lower.
The Indian rupee was soft ahead of the RBI decision and a news conference by its governor. "Our house view is no cut this afternnon, but a 25 basis point rate cut in October," said Gao. "If they cut and if they reiterate their inflation target, I think in general we may see a kneejerk decline in rupee."
"However, the central bank sticking to its inflation target is important, which could enhance investors' confidence in Indian economy and the RBI's independence, which could be a positive factor for rupee in the long term." he added. As of Tuesday's close, the rupee has appreciated about 5.6 percent against dollar this year.
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