Most Asian FX drop

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    Most Asian currencies edged lower on Tuesday, paring gains from the previous session as earlier optimism about a breakthrough in US-China trade negotiations waned on reports a deal was not yet finalized.

    Curbing investor appetite in Asia was a Bloomberg report, citing sources, that said China wants more talks before the end of October to hammer out the details of US President Donald Trump’s proposed deal before Chinese President Xi Jinping signs it.

    Last week, Trump signaled the two sides had reached agreement on “phase one” of a deal and suspended a tariff hike, but officials said much work still needed to be done.
    The Philippine peso, Thai baht, and the Indian rupee, each fell about 0.1 percent on the day.

    “The initial enthusiasm over the US-China trade breakthrough had been exhausted at the start of the week, tamed also by the fact that China is seeking more talks prior to the signing of a ‘Phase One’ deal,” said Jingyi Pan, a Singapore-based market strategist with financial services firm IG.

    Also weighing on sentiment was economic data from China showing a fall in factory gate prices, which added to the pessimistic mood in Asian currency markets.

    China’s producer price index (PPI), considered a key barometer of corporate profitability, dropped 1.2 percent year-on-year in September, marking the steepest decline since July 2016.

    China’s yuan edged lower despite its central bank lifting its official yuan midpoint to the highest level in a month on Tuesday.

    The Malaysian ringgit also fell on worries that India, the biggest buyer of Malaysian palm oil so far in 2019, could raise import taxes or enforce other measures to curb imports from Malaysia.

    Also, some analysts said uncertainty ahead of the Brexit talks kept investors cautious on the day.

    Officials from Britain and the EU will meet at a make-or-break summit on Thursday and Friday that will determine whether or not Britain is headed for a so-called no-deal Brexit.

    “I see that as an another political event that market participants will be watching across the globe and here in Asia as well,” said IG’s Pan.

    “That said, in the near-term the impact may be contained given the likelihood that an extension could be the case.” – Reuters

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