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=ASIA FX: Yuan Falls On Dollar Index Strength, Weak Daily Fixing

HONG KONG (Aug 20) -- The Chinese yuan led Asian currencies lower after the dollar index climbed to a near three-week high amid a rebound in Treasury yields.

The onshore yuan slipped 0.2% to 7.0632 after comments by Federal Reserve Bank of Boston President Eric Rosengren lifted the dollar and U.S. yields. Rosengren said while global conditions were weak, he wanted to see evidence of an economic slowdown before he was willing to ease monetary policy further. Rosenberg pointed to healthy unemployment trends and signs that inflation is rising to the Fed’s 2% target for the reluctance to ease rates. Rosenberg was one of two policymakers who dissented to the Fed’s decision to cut rates last month.

Meanwhile, the People’s Bank of China weakened the yuan fixing rate by the most in a week on Tuesday. The Chinese central bank fixed the daily yuan reference rate at 7.0454, compared with yesterday’s 7.0365.

Further, the PBoC fixed the one-year benchmark lending rate under the revamped Loan Prime Rate at 4.25%, down from 4.31% yesterday. Over the weekend, the Chinese central bank had announced a reform of the interest rate system that required banks to price loans of the new LPR.

Among other Asian currencies on Tuesday, the Indonesian rupiah was down 0.2% at 14,255 to the dollar, while the Malaysian ringgit, the Indian rupee, and the Taiwanese dollar declined 0.1% each. The South Korean won, the Philippine peso, the Thai baht, the Singapore dollar, the Hong Kong dollar, and the Japanese yen were barely changed from yesterday’s close. The Australian dollar was up 0.3%. Taiwan’s July export orders data and Hong Kong’s consumer inflation numbers for the same month are due later in the day.

Regional equities nudged higher on Tuesday after U.S. stocks rose for the third day yesterday. The S&P 500 Index climbed 1.2%, taking its advance in three sessions to 3%. The benchmark gauge has now recouped the entire 3% drawdown suffered last Wednesday, prompted by U.S. yield curve worries.

The 10-year U.S. yield was presently about six basis points above that the two-year after having briefly fallen into negative territory last week. The inversion of the yield curve had prompted worries on the U.S. economic outlook.

The Shanghai Composite index was up about 0.1%. The U.S. once again yesterday delayed a full ban on American corporations from doing business with Huawei Technologies, while adding more affiliates of the Chinese telecom equipment provider to the Entity List.

- By Hong Kong Newsroom;; +852 3960 5102
- Edited by Nimesh Vora
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- Copyright (c) 2019 Nikkei NewsRise Asia Pte Ltd.

© 2019 Nikkei NewsRise Asia Pte Ltd. All Rights Reserved.
© 2019 Nikkei NewsRise Asia Pte Ltd.
All Rights Reserved.