Most emerging Asian currencies firmed on Monday, with the dollar staying in a defensive stance on concerns over US-China trade tensions and following a report that showed the US economy created the fewest jobs in six months in March. The dollar index stood at 90.18 against a basket of six major currencies, down from a one-month high of 90.597 ahead of the US non-farm payrolls on Friday.
China warned it was fully prepared to hit back with fresh trade measures if the US follows through on President Donald Trump's threat to slap tariffs on an additional $100 billion of Chinese goods. Combative statements from the two countries have stirred fears of a full-blown trade war that could hurt global economic growth. The US payrolls report for March, which showed an increase of just 103,000 jobs from February's surge of 326,000, also weighed on the dollar.
"EM Asia FX are expected to remain supported this week, awaiting anxiously for any signs of a de-escalation in President Xi's keynote speech at the Boao Forum," said Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore. "The greater integration of China and Asia in the global value chains renders the region's smaller economies more vulnerable to slower global trade growth."
Chinese President Xi Jinping will attend this month's Boao Forum and deliver a keynote speech, unveiling new measures on reform and opening up at the annual forum. Among Asian currencies, the South Korean won rose as much as 0.4 percent, posting its biggest intraday percentage gain in a week. The Singapore dollar and the Malaysian ringgit both gained as much as 0.2 percent, while the Indian rupee touched its highest in almost two weeks.
Singapore's central bank is expected to tighten monetary policy in April, a Reuters poll showed, but Ji said it is "likely to stand pat due to both subdued inflation, and more importantly, the prospect of a further escalation in the US-China trade conflict." Twelve of 19 analysts expect a slight increase in the appreciation rate of the Singapore dollar's policy band from zero percent, a "neutral" stance that the central bank has kept for the last two years. The Indonesian rupiah traded flat, while China's yuan inched up 0.1 percent.
Meanwhile, the Taiwan dollar edged down as much as 0.4 percent, hitting a four-week low, and the Thai baht fell as much as 0.2 percent to its lowest in more than two weeks. Markets in Philippines were closed for a holiday. The Chinese yuan crept up 0.1 percent on Monday, while the dollar also steadied about the same, having retreated late last week due to concerns over US-China trade tensions.
In the spot market, the onshore yuan opened at 6.3005 per dollar and was changing hands at 6.2962 at midday, 65 pips firmer than the previous late session close. "The USD/CNY continues its steady path...While being immune mostly to external developments, the currency is focusing on domestic events, such as the Boao Forum this week," said Ji.
Sino-US trade frictions have been bearish for the dollar in recent trading sessions, but analysts expect they could hit sentiment on the yuan harder in the longer term.
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