Asian cur­ren­cies re­cover af­ter yuan-cut rout

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Asian cur­ren­cies gained Thurs­day, re­bound­ing from the worst two-day rout in al­most 20 years af­ter China re­as­sured mar­kets it would not en­gage in a cur­rency war.

Emerg­ing mar­ket cur­ren­cies in­clud­ing the In­done­sian ru­piah, Philip­pine peso and South Korean won rose slightly against the dol­lar af­ter China Thurs­day trimmed its yuan ref­er­ence rate 1.1 per­cent.

The cut, which was smaller than those in the pre­vi­ous two days, and news the cen­tral bank in­ter­vened to sta­b­lise the yuan on Wed­nes­day re­as­sured deal­ers Bei­jing would not al­low its cur­rency to slump.

"It s likely the worst is over," Pa­trick Ben­nett, a strate­gist at Cana­dian Im­pe­rial Bank of Com­merce in Hong Kong, told Bloomberg News.

"PBOC in­ter­ven­tion has calmed the mar­ket. There is not a sense that the on­shore yuan will weaken for­ever."

In Tokyo af­ter­noon trade the dol­lar changed hands at 124.39 yen, up from 124.24 yen in New York, where it took a hit on fears Bei­jing s moves un­der­scored weak­ness in China s econ­omy and could de­lay a US in­ter­est rate hike.

China s latest de­val­u­a­tion comes af­ter two pre­vi­ous cuts, on Tues­day and Wed­nes­day, sparked con­cerns that the world s num­ber two econ­omy, long an en­gine for world growth, is weaker than pre­vi­ously thought.

The move sent Asia-Pa­cific cur­ren­cies plum­met­ing, push­ing the Malaysian ring­git to 17-year lows, on fears the cut could hurt other re­gional economies and spark a race to the bot­tom by cen­tral banks in a bid to keep their ex­ports com­pet­i­tive.

On Wed­nes­day, Viet­nam dou­bled the trad­ing band for the dong, al­low­ing the cur­rency to weaken to try to make ex­ports more com­pet­i­tive as China falls. An­a­lysts warned, how­ever, that Asia-Pa­cific cur­ren­cies are still at risk af­ter suf­fer­ing their worst two-day sell­off since 1998.

"The talk of China join­ing a cur­rency war could set out a round of com­pet­i­tive val­u­a­tion in the re­gion," said Ai­dan Yao, se­nior emerg­ing mar­ket economist at AXA In­vest­ment Man­agers.

"This, cou­pled with the an­tic­i­pated Fed tight­en­ing, may trig­ger mas­sive cap­i­tal out­flows that lead to cat­a­strophic con­se­quences for Asia."

In other trad­ing, the euro ex­changed hands at $1.1136 and 138.62 yen against $1.1159 and 138.63 yen in New York. -

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