February 24, 2018, 10:41 pm
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Asian FX mixed as dollar weakens

Asian currencies were mixed on Wednesday as uncertainties about the US tax reform plan led to broad dollar weakness while the recent surge in oil prices hit currencies of major oil importing countries.

The dollar was down 0.2 percent at 113.800 yen falling away from an eight-month high of 114.735 touched on Monday. The greenback’s fall was due to a media report that suggested a centrepiece corporate tax cut under discussion in US tax reforms plans could be delayed.

Singapore dollar China’s yuan and Thai baht all gained against the dollar on the day.

Meanwhile, crude oil prices hovered near two-year highs, weighing on currencies of major oil importers in the region, such as the Indian rupee, Indonesian rupiah and the Philippine peso.

“Dollar-peso is going up because of corporate demand. We are seeing a lot more corporate demand right now, which is oil related,” Jason Manalac, a trader at Philippine Bank of Communications.

The peso was also undermined by a fall in forex reserves. The central data showed the reserves stood at $80.615 billion, the lowest in nearly two years.

The Indian rupee losses against the dollar extended to nearly 1 percent for the week.

Rising oil prices could widen India’s current account deficit, lower the government’s excise duty and spur market concerns over the nation’s inflation outlook, Scotiabank said in a report. India is the second-largest crude oil consumer in Asia after China.

The South Korean won’s fell more than quarter of a percent, after a strong rhetoric by the US President Donald Trump in Seoul on Wednesday. 

Trump issued a stark warning to North Korean leader Kim Jong Un on Wednesday, telling him that the nuclear weapons he is developing “are not making you safer, they are putting your regime in grave danger”.

In the near-term, the dollar will be positive against Asian currencies, some analysts said.

Khoon Goh, head of Asia Research at ANZ, said increased expectations of Federal Reserve rate hikes in 2018 and the possibility of the passage of tax reforms by December, should be supportive for the dollar.

“We are looking for Asian currencies to weaken by the end of the year,” – Reuters
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