Asian currencies make progress; rupee headed for weekly gain

The rupee strengthened 0.4 per cent to 69.10 against the dollar and is set to gain for the fifth straight week.

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A customer counts Indian Rupee notes at a fuel station, in Kolkata on Tuesday, Aug 14, 2018. The rupee today breached the historic low of 70-mark against the US dollar today before recovering at close on suspected RBI intervention and the finance ministry's dismissing the concerns over its sharp fall.Photo/Swapan Mahapatra) (Story no. DEL53)
Most emerging Asian currencies made small gains on Friday as improved sentiment over reports of progress in US-China trade talks was partially tempered by fears of a fresh flare-up in tensions on the Korean peninsula, which knocked the won.

The South Korean won weakened as much as 0.4 per cent to 1139.20 against the dollar, its lowest level since November 13, hit by reports that North Korea is considering suspending nuclear talks with the United States. The news comes after the failed summit last month between US President Donald Trump and North Korean leader Kim Jong Un in Vietnam.

"If North Korea does pull out of talks, that will bring geopolitical concerns related to the Korean peninsula back on the table. We will see Korean assets starting to price in geopolitical risk elements," Khoon Goh, head of Asia research at ANZ Banking Group (Singapore) said.


Much of the rest of emerging Asia drew some relief as Chinese Vice Premier Liu He said he spoke by telephone with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, with the two sides making further substantive progress on trade talks.

The overall gains, however, were capped by uncertainty over when the two economic powers would reach an agreement.

The Singapore dollar edged higher and was set to gain for the week, while the Philippine peso dipped 0.1 per cent against the dollar.

THE INDIAN RUPEE
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The Indian rupee strengthened as much as 0.4 per cent to 69.10 on the dollar, and is set to gain for a fifth consecutive week. Investors have regained some of their lost appetite for emerging Asia's worst performing currency in 2018, when it tumbled more than 8 per cent.

A Reuters poll showed investors are bullish on the rupee for the first time in nearly a year, as a recent surge in popularity of the country's ruling party is expected to augur well for its alliance in the upcoming national elections.

"The rupee continues to remain in appreciating mode due to foreign institutional investors inflow in the debt and equity market," Rushabh Maru, a currency and commodity analyst at Anand Rathi Shares and Stock Brokers Ltd said. "Crude oil prices are stable and hence, inflation is expected to remain benign in coming months."

THE INDONESIAN RUPIAH

The Indonesian rupiah weakened as much as 0.3 per cent, before paring some of the losses. Data showed the country posted a surprise trade surplus in February, for the first time in five months, as imports unexpectedly fell sharply. Southeast Asia's largest economy has been struggling to reduce its trade deficit, which hit a record high of $8.5 billion last year.
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"The fact that Indonesia managed to turn the large trade deficit into a small surplus has seen the rupiah recover somewhat," Goh said. However, he noted that Indonesia is still running a current account deficit, and weak trade numbers from across Asia, were factors that would continue to weigh on the currency.


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