EM ASIA FX-Most subdued as trade war, global growth fears darken mood

By Aditya Soni

* Currencies largely muted as dollar propped by safe-haven demand * Baht weakens most; Thai politics in spotlight * Economists see another rate cut by RBI (Adds text, updates prices) By Aditya Soni Feb 8 (Reuters) - Most Asian currencies were subdued against a stronger dollar on Friday, weighed by fresh doubts the United States and China can clinch a trade deal before the March 1 deadline and downgrades on global growth. Markets awaiting progress on U.S.-China trade talks were dismayed when President Donald Trump said he did not plan to meet with his Chinese counterpart Xi Jinping before the deadline to achieve a trade deal. "Market players see less chance of a deal and higher likelihood of more tariffs on China's shipments to the U.S.," Maybank said in a client note. Sentiment was further soured by fears about rampant slowdown in global growth as the European Commission slashed its forecasts for euro zone economic growth this year and next citing trade frictions and domestic challenges. Boosted by demand for safe-haven assets, the dollar index firmed about 0.1 percent to a near two-week high, putting pressure on Asian currencies. The Thai baht weakened 0.4 percent to a more than one-week low and led losses in the region. Thailand's royalty made an unprecedented move into politics on Friday when the sister of King Maha Vajiralongkorn was declared a prime ministerial candidate in a March 24 general election, registration papers showed. One of her leading opponents will be Prime Minister Prayuth Chan-ocha, the leader of the military junta, who also announced his candidacy on Friday. "That has thrown the entire elections into a turmoil, the market has been processing in that the military incumbent had a good chance of winning this race. But the princess is a strong candidate and that definitely has an impact on the currency," said Jeffrey Halley, a senior market analyst at OANDA. The Indian rupee strengthened 0.3 percent, the most among its peers, helped by a sharp drop in oil prices, which would take some pressure off the world's third-biggest oil importer. The Philippine peso firmed 0.1 percent. The Philippine central bank kept its benchmark interest rate steady for a second straight meeting on Thursday. The Korean won, Malaysian ringgit and Indonesian rupiah posted meagre gains. The Chinese yuan and Taiwan dollar did not trade due to market holidays. MORE CUTS TO COME? India's central bank on Thursday unexpectedly lowered interest rates and, as anticipated, changed its policy stance to "neutral" to boost a slowing economy after a sharp slide in the inflation rate. The rupee had weakened immediately after the decision, but ended the day 0.1 percent higher. The central new bank's governor Shaktikanta Das also hinted that there is more room to cut rates if inflation remains muted, sounding a markedly more dovish tone from the central bank. "A decisive change in tone, with even the perpetual hawk (Dr. Patra) joining the rate cut camp, gives further credence to our view that one more cut is on its way," Madhavi Arora, economist at Edelweiss Securities, said in a client note. "And with the tone of the policy assertively dovish, we continue to see one more 25 bps cut coming in April," she added. The following table shows rates for Asian currencies against the dollar at 0516 GMT. CURRENCIES VS U.S. DOLLAR Change on the day at 0516 GMT Currency Latest bid Previous day Pct Move Japan yen 109.700 109.8 +0.09 Sing dlr 1.356 1.3562 -0.01 Korean won 1123.800 1124.1 +0.03 Baht 31.380 31.25 -0.41 Peso 52.060 52.09 +0.06 Rupiah 13965.000 13970 +0.04 Rupee 71.290 71.45 +0.22 Ringgit 4.069 4.0715 +0.06 Change so far in 2019 Currency Latest bid End 2018 Pct Move Japan yen 109.700 109.56 -0.13 Sing dlr 1.356 1.3627 +0.46 Taiwan dlr 30.745 30.733 -0.04 Korean won 1123.800 1115.70 -0.72 Baht 31.380 32.55 +3.73 Peso 52.060 52.47 +0.79 Rupiah 13965.000 14375 +2.94 Rupee 71.290 69.77 -2.13 Ringgit 4.069 4.1300 +1.50 Yuan 6.734 6.8730 +2.06 (Editing by Jacqueline Wong)