EM ASIA FX-Most Asian currencies hug tight ranges; yuan leads on trade optimism

By Aby Jose Koilparambil

(Adds text, updates prices) By Aby Jose Koilparambil Jan. 11 (Reuters) - Asian currencies were largely locked in a tight range on Friday, with most investors adopting a wait-and-see approach as they tracked developments in U.S.-China trade talks. Both the United States and China have underscored satisfactory progress in their bid to resolve the months-long trade dispute that has rattled global financial markets. Investors remain wary as the world's top two economies continue their talks ahead of the March 1 deadline when the 90-day trade truce between Washington and Beijing ends. Financial markets have also had to contend with the shifting policy stance at the Federal Reserve, mostly in favour of riskier assets, as policy makers have suggested the central bank may soon hit the pause button on its tightening cycle. That view was further cemented by Fed Chairman Jerome Powell reiterating on Thursday the case for being patient on any more rate increases. The Fed's cautious stance has put a break on the dollar, and in turn helped boost appetite for riskier currencies including many in Asia. "The sentiment pendulum has swung from U.S. recession fears to optimism for a dovish Fed and positive U.S.-China trade talks... The return of risk appetite, in turn, has pressured the US dollar lower," said analysts at DBS Bank Ltd in a note on Friday. Investors turned bullish on most Asian currencies for the first time since early last year, a Reuters poll showed, as risk appetite rose on hopes of a halt to the U.S. rate hike cycle, and the world's top two economies settling a months-long trade row. The Chinese yuan strengthened for a third consecutive session, rising as much as 0.6 percent. The currency of the world's second largest economy is on course for a weekly gain of about 1.8 percent, its best weekly performance since July 2005, helped by optimism over trade talks as well as on a string of measures by Beijing to support a wobbly economy. The Indonesian rupiah, another strong performer in the new year, is set to put on about 1.8 percent for the week and was up 0.3 percent on the day. The Malaysian ringgit and the Korean won gained slightly on the day, while the Indian rupee, bucked the trend to shed 0.1 percent and is poised to give up about 1.3 percent for the week. "In 2019, the depreciation pressure on the rupee should moderate relative to 2018, but is unlikely to go away... Domestic drivers may also weigh on the INR, including the still deteriorating core balance of payments, the softening growth outlook, and election risks," said HSBC Global Research analysts in a note. The following table shows rates for Asian currencies against the dollar at 0534 GMT. CURRENCIES VS U.S. DOLLAR Currency Latest bid Previous day Pct Move Japan yen 108.290 108.42 +0.12 Sing dlr 1.351 1.3520 +0.10 Taiwan dlr 30.786 30.782 -0.01 Korean won 1115.900 1118.3 +0.22 Baht 31.880 31.91 +0.09 Peso 52.120 52.23 +0.21 Rupiah 14015.000 14050 +0.25 Rupee 70.420 70.41 -0.01 Ringgit 4.094 4.095 +0.02 Yuan 6.749 6.7890 +0.60 Change so far in 2019 Currency Latest bid End 2018 Pct Move Japan yen 108.290 109.56 +1.17 Sing dlr 1.351 1.3627 +0.89 Taiwan dlr 30.786 30.733 -0.17 Korean won 1115.900 1115.70 -0.02 Baht 31.880 32.55 +2.10 Peso 52.120 52.47 +0.67 Rupiah 14015.000 14375 +2.57 Rupee 70.420 69.77 -0.92 Ringgit 4.094 4.1300 +0.88 Yuan 6.749 6.8730 +1.84 (Reporting by Aby Jose Koilparambil in Bengaluru)