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  • Jun 22nd, 2018
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All emerging Asian currencies weakened against a firming dollar on Thursday, as comments by the US Federal Reserve chairman on the pace of rate hikes and a pick-up in US yields fuelled the greenback. Treasury yields rose on Wednesday after Federal Reserve Chairman Jerome Powell said the Fed bank should continue to gradually raise rates.

The dollar index against a group of six major currencies stood at 95.243 after rising to 95.299 overnight, its highest since mid-July 2017. Among the regional currencies, the Taiwan dollar lost 0.2 percent ahead of a monetary policy meeting later in the day. The Taiwan's central bank is widely expected to keep its policy rate steady for an eighth straight quarter.

Thirteen of 17 analysts polled by Reuters said they expected the central bank to leave the benchmark discount rate at 1.375 percent. Four analysts predicted a 12.5 basis point rise to 1.5 percent. "Taiwan's sovereign bonds and currency have held up well through the recent bout of emerging markets stress. This should not come as a surprise given Taiwan's large current account surplus, substantial FX reserves and low level of government indebtedness," DBS Bank strategists Philip Wee and Duncan Tan wrote in a note.

"As a result, the Taiwan central bank enjoys some level of flexibility in setting the timing and pace of policy normalization." Indonesia's rupiah weakened 1.23 percent on Thursday as currency market opened for the first time since June 8 as traders returned from a series of public holidays. The fall was despite Bank Indonesia saying on Tuesday that it was ready to defend the rupiah and respond to the US Federal Reserve's interest rate increase with another hike of its own.

China's yuan lost 0.27 percent, with the central bank's fixing rate set at its weakest in more than five months. Malaysia's ringgit was 0.15 percent weaker, leaving it relatively untouched compared to regional peers. The Singapore dollar and the South Korean won weakened 0.29 percent and 0.41 percent, respectively.

Thailand's baht slid as much as 0.5 percent on Thursday to touch its lowest since mid-November as the Bank of Thailand held rates steady on Wednesday. Bank of Thailand Governor Veerathai Santiprabhob told reporters on Thursday that Thailand has a strong external position and the baht could withstand an impact from global trade protectionism.

The Philippine peso slid 0.27 percent to move closer to an 12-year intra-day low seen on Monday. Thursday's weakness came despite the Philippine central bank hiking rates for the second time in six weeks on Wednesday and saying it was ready to take further action to tame inflation and volatility in the peso. The country is seeing significant outflows and its equity benchmark fell as much as 2 percent on Thursday, setting it on its way to end a sixth straight session lower. The Indian rupee saw a 0.21 percent fall on Thursday after the minutes of the Reserve Bank of India's (RBI) June policy meeting were released after market hours on Wednesday.

Copyright Reuters, 2018

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