Asian currencies pulled ahead slightly on Tuesday as growing signs of progress in Sino-US trade talks raised hopes of an imminent preliminary deal in a long-running tariff dispute that has whipsawed financial markets over the past year.
However, the gains were checked by a stronger dollar, which was the chief beneficiary of the brightening prospects on the trade deal front.
The dollar index against a basket of six major currencies rose as much as 0.14 percent to 97.645, its highest level in almost a week.
Any progress in resolving the trade row between the world’s top two economies would potentially boost the dollar and riskier assets, and also reduce global growth worries and the need for aggressive monetary easing.
People familiar with the negotiations told Reuters that China is pushing US President Donald Trump to remove more tariffs imposed in September as part of a “phase one” trade deal.
The deal, which may be signed later this month by Trump and Chinese President Xi Jinping at a yet-to-be determined location, is widely expected to include a US pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys.
“The progress in China-US trade talks has lifted the sentiment in the currency markets, particularly in the yuan as there are some talks about US rolling back tariffs on certain Chinese products,” said Gao Qi, forex strategist at Scotiabank.
Also, underpinning the Chinese yuan were policy measures initiated to prop up the economy and boost business confidence, with China’s central bank earlier in the day cutting the interest rate on its medium-term lending facility for the first time since early 2016.
The yuan climbed by as much as 0.3 percent to fresh 2-1/2-month highs, while the Philippine peso gained about 0.2 percent.
The Singapore dollar, the Indian rupee and the Malaysian ringgit tacked on about 0.1 percent each.
Malaysia’s central bank kept its benchmark interest rate unchanged as expected, saving its policy ammunition in case global growth falters next year.
The gains in the Thai baht, the Korean won, the Indonesian rupiah and the Taiwanese dollar were relatively limited. – Reuters