1. Asian currencies edge up as dollar pressured by concerns over Trump

Asian currencies edge up as dollar pressured by concerns over Trump

Most emerging Asian currencies inched up on Wednesday as the dollar came under further pressure after reports that US President Donald Trump asked then-FBI Director James Comey to end a probe into Trump's former national security advisor.

By: | Published: May 17, 2017 2:45 PM
The tumult at the White House prompted currency traders to ditch the dollar to favour a broad range of currencies, most notably against the yen.

Most emerging Asian currencies inched up on Wednesday as the dollar came under further pressure after reports that US President Donald Trump asked then-FBI Director James Comey to end a probe into Trump’s former national security advisor. Trump asked Comey to end the FBI investigation into ties between former White House National Security Advisor Michael Flynn and Russia, according to a source who has seen a memo written by Comey.

Trump later fired Comey whose dismissal sparked a furore which was soon followed by more outrage over Trump’s alleged sharing of classified intelligence with Russian Foreign Minister Sergei Lavrov at a meeting in Trump’s office. The reports of Comey’s memo raised questions over whether obstruction of justice charges could be laid against Trump, weakening confidence in the U.S. president’s ability to push through an aggressive stimulus programme that investors had been banking on since his election last November.

“As reporting intensifies on Trump’s potential mishandling of classified information, markets are becoming concerned whether key legislation on tax reforms could be deferred or derailed,” said Mizuho Bank in a note. The tumult at the White House prompted currency traders to ditch the dollar to favour a broad range of currencies, most notably against the yen, to which investors often turn as a safe haven when there are problems in the United States.

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The yen strengthened 0.7 percent against the dollar to touch a more than one-week high. The dollar was also dented by a report that U.S. housing starts dropped 2.6 percent to a seasonally adjusted annual rate of 1.17 million units, the lowest level in five months, hurt by persistent weakness in the construction of multi-family housing.

In other Asian currencies, Malaysian ringgit appreciated 0.1 percent against the dollar. Malaysian consumer prices in April were 4.4 percent higher than a year earlier, just below the 4.5 percent annual pace forecast in a Reuters poll, and down from March’s 5.1 percent, the highest rate in eight years. Meanwhile, the Korean won reversed earlier gains to fall 0.3 percent, as traders took profits after currency hit six-week high a day earlier.

CHINESE YUAN

The yuan nudged higher on Wednesday after China set its official midpoint at 6.8635 per dollar prior to the market open on Wednesday, its strongest level since February 17, reflecting the U.S. currency’s weaker global trend. Wednesday’s fixing was 62 pips, or 0.23 percent, firmer than the previous setting at 6.8790.

Additionally, Hong Kong and Chinese regulators formally approved a long-awaited scheme to connect China’s $9 trillion bond market with overseas investors. “We expect flows into China’s bond market to increase as a result of the bond connect between Hong Kong and Mainland China. This may in turn support the central bank to loosen its capital controls,” OCBC Bank said in a note. The currency is on track to rise for a fourth straight day against the dollar in what will be its longest streak of gains since November 2016.

TAIWANESE DOLLAR

The Taiwanese dollar drifted marginally lower to 30.124 on Wednesday, remaining on track to end a four-day winning streak against the dollar. Inflows into Taiwanese equities dropped to around $1 billion in April, from more than $2 billion in March. But the non-deliverable outright market expects the currency to appreciate to 29.698 against the dollar in a year. Taiwan’s central bank Governor Perng Fai-nan has been looking at ways to get Taiwan off the U.S. government’s list of possible currency manipulators by turning on its head a decades-old policy of keeping the currency weak.

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