Most Asian currencies slipped on Wednesday as investors digested a measure by the US Senate to protect human rights in Hong Kong and China’s condemnation against the move, while Washington warned of fresh tariffs if a deal is not reached with Beijing.
However, most currencies did not mark large moves as usually seen during trade ructions, indicating that many in the market still believed an interim deal was likely.
Caution ahead of the release of minutes from the US Federal Reserve’s last policy meeting also kept trading ranges tight.
“While it has potentially complicated the US-China phase-1 deal negotiations, at this stage, it doesn’t look like it’s in danger of derailing it,” said Khoon Goh, head of Asia research at ANZ Banking Group (Singapore), referring to the US Senate’s measure.
“Markets have taken the HK bill passage in their stride… (they’ve) pretty much thoroughly priced in a successful deal, so now they really need to see evidence that this is going to go ahead.”
The Chinese yuan inched lower against the dollar, following a slightly weaker-than-expected midpoint fix.
China’s main lending rate benchmark, which is set by banks, fell for the third time since August following cuts in the central bank’s short- and medium-term lending rates.
The People’s Bank of China has been easing lending rates in order to shore up liquidity and spur economic growth.
The South Korean won fell about 0.2 percent to the dollar, while the Indian rupee was largely flat.
The Philippine peso was among the few outliers for the day, rising about 0.2 percent after two days of sharp declines.
Recently, the International Monetary Fund upgraded the country’s 2020 growth forecast, saying the government had room to strengthen expansionary measures.
Philippine lawmakers on Monday approved a bill extending the life of the 2019 budget up to the end of next year, allowing the government to fund priority projects.
The Thai baht rose slightly, touching its strongest level against the dollar in more than two weeks.
ANZ’s Goh said the baht remained attractive because of Thailand’s large current account surplus, and that it was unlikely to weaken in the near term. – Reuters