Asian currencies strengthen on signs of easing trade tensions
SINGAPORE/HONG KONG: Emerging Asian currencies strengthened on Thursday as the dollar weakened following a softer US inflation report, while the US-China trade truce and signs that President Donald Trump may adopt a milder stance in tariff talks also supported risk sentiment.
The Taiwan dollar advanced 0.8 per cent to its highest level since early-May, and the South Korean won rose 0.9 per cent. The Malaysian ringgit inched up 0.3 per cent, and the Thai baht rose 0.4 per cent to a near three-week high.
Investor focus this week remained on trade talks between Washington and Beijing, which concluded with a framework deal that would lift Chinese export curbs on rare earth minerals and restore access for Chinese students to US universities.
"Relief from the fact that both the countries have managed to reach an agreement following their talks earlier in the week has been more or less priced in by markets, which has made the US dollar continue to weaken, helping Asian currencies," said Khoon Goh, head of Asia research at ANZ.
The dollar index dipped 0.2 per cent as signs emerged that Trump may take a more conciliatory tone in tariff negotiations. Trump said he was open to extending a July 8 deadline to conclude trade talks with countries before imposing higher tariffs.
He also said the US would send out letters in one to two weeks outlining the terms of trade deals to dozens of other countries.
Meanwhile, data also showed US consumer prices rose less than expected in May, prompting traders to ramp up bets on a Federal Reserve rate cut as early as September, adding pressure on the dollar.
Around the world, Iran warned if nuclear negotiations fail and conflict arises with the United States, it will strike American bases in the region. Back in Asia, stocks in South Korea were up 0.9 per cent, while those in Singapore and Malaysia edged up 0.2 per cent and 0.1 per cent, respectively.
However, shares in Taiwan fell 0.8 per cent. Insurance company Fubon Financial Holding , which reported a significant loss for May, was among the top drags on the benchmark index.
"There are ongoing concerns about the impact of the strong Taiwan dollar on the profitability of Taiwanese life insurance companies," Goh said.
Thai stocks slipped 0.4 per cent as political uncertainty deepened with the Supreme Court set to hear a case that could result in jail time for former Prime Minister Thaksin Shinawatra. Markets in Philippines were closed for a holiday.
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