Asia EM FX under pressure as US -China talks shelved

Sept 24 (Reuters) – Asian currencies were weaker across the
board on Monday as investors faced the prospect of an escalation
in the Sino-U.S. trade conflict after China cancelled upcoming
talks even as the latest round of tariffs take effect.
China cancelled mid-level trade talks with the United
States, the Wall Street Journal reported. With no compromise in
sight, many expect the latest move will only raise the tension
between the world’s two largest economies.

U.S. tariffs on $200 billion worth of Chinese goods and
retaliatory tariffs by Beijing on $60 billion worth of U.S.
products took effect on Monday.
With Beijing’s stance appearing to have hardened, U.S.
President Donald Trump’s threat of tariffs on all remaining $267
billion of Chinese exports to the United States looks more like
becoming a reality.

Several regional central banks are expected to raise their
own rates to defend their respective currencies.
Indonesia’s rupiah weakened 0.3 percent to 14,865 per
dollar ahead of a Bank of Indonesia meeting set for Thursday.
Similarly, the Bangko Sentral ng Pilipinas (BSP) is also
meeting on Thursday to decide rates, with the peso
slipping 0.2 percent to 54.21, lingering around its weakest
level against the dollar since late 2005.
With the Fed rate hike priced in by many, Mizuho and OCBC
bank both predict BSP will raise rates by 50 basis points, while
Bank Indonesia is seen hiking its policy rate 25 basis points.
Stephen Innes, head of trading Asia for Oanda, cautioned the
hawkish plays, “without addressing the real underlying problems
around deficits, hiking interest rates to prop up currency is
like putting a band-aid on a broken leg. Speculators will
continue to target deficit currencies at every opportunity.

Reuters

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes