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Most Asian currencies gain ahead of Fed decision

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Dion Global

30 Jan 2019

Most Asian currencies gained on Wednesday, on expectations that the US Federal Reserve will signal a slower approach to rate hikes, and on hopes that Sino-US trade talks this week will help de-escalate a trade war that has hurt Asian exporters.

The Fed's two-day policy meeting is due to end later in the global day, and it is widely expected to hold rates unchanged after recent comments from officials signalled a slower pace of rate increases this year. The dollar index against a basket of six major currencies dipped 0.1 per cent to 95.753. Optimism over the trade talks was fanned by comments from Apple Chief Executive Officer Tim Cook, who is in regular contact with US President Donald Trump and described the trade tensions as easing this month.

Less optimistically, some investors still feared the two governments would struggle to bridge their differences after the US decision on Tuesday to charge Chinese telecommunications giant Huawei Technologies Co Ltd with trade sanctions violations related to Iran. China's yuan led the gains, rising 0.3 per cent to 6.715 a dollar, its strongest level in over six months.

Market participants regarded the yuan's stronger performance as a good omen for the trade talks, as the US side does not want to see a weak yuan giving Chinese exporters a competitive advantage. The Philippine peso, Malaysian rinngit and Singapore dollar all strengthened 0.1 per cent against the greenback. Both the rupiah and India's rupee, two nations dependent on oil imports, weakened 0.2 per cent, hurt by a rise crude prices due to concerns over possible supply disruptions arising from Venezuela's political crisis.

The baht strengthened 0.1 per cent against the dollar to 31.473, its highest since the end of April last year. The unit, which was the only currency among its regional peers to gain, albeit marginally, in 2018, has picked up 3.4 per cent so far this year, and will likely strengthen for a third straight month. DBS, in a note, said a combination of Bank of Thailand's policy lift-off in December, still sizeable current account surplus and impending elections have helped the baht. The country's finance minister on Wednesday, however, cautioned that the baht should not strengthen more than currencies of other exporters.