Asian currencies firm as investors look past trade concerns

By Patturaja Murugaboopathy

(Reuters) - Asian currencies strengthened on Thursday, supported by a broader swing higher in risk sentiment as investors appeared to brush aside concerns about the impact of the Sino-U.S. trade war on emerging markets.

Washington earlier this week imposed 10 percent tariffs on about $200 billion worth of Chinese imports, while Beijing announced new retaliatory levies on about $60 billion worth of U.S. goods at scaled-back rates.

However, analysts say the recent intensification in the trade dispute has not significantly damaged investor sentiment toward emerging markets, which have sold off heavily in recent months.

"The possible move away from U.S. assets to EM assets is keeping U.S. Treasury yields buoyant and selected Asia-ex-Japan currencies supported," said Saktiandi Supaat, head of FX research at Maybank.

"The risk of re-escalation of a trade-war and the run-up to FOMC meeting next week are some of the risk factors that may still keep the dollar some what supported, but we believe stretched positioning is a more compelling reason for the dollar to fall further," Supaat added.

Speculator's net long bets on the U.S. dollar fell to the lowest since mid-July, according to calculations by Reuters and Commodity Futures Trading Commission data released at the end of last week.

Rob Carnell, head of research at ING in Singapore, said the latest U.S. tariffs are being phased at a slightly slower pace than may had expected.

"Of course, there are more tariffs in the pipeline, but like many episodic market drivers, there comes a point when incremental changes cease to have much economic impact," Carnell said.

Regional currencies also were propped up by Premier Li Keqiang's comments on Wednesday that China will not weaken the yuan to boost exports.

The Indonesian rupiah and Philippine peso both climbed nearly 0.2 percent each, drawing comfort from their governments' proposed measures to shore up their currencies.

The Philippine central bank signalled a fourth hike in its benchmark interest rates this year on Tuesday, while Indonesian finance minister said the government is aiming to persuade exporters to keep their earnings onshore and convert them into local currency.

Most analysts expect the Indonesian central bank to raise its interest rates in the next week's meeting, which would be its fifth consecutive hike since May.

Analysts also expect the Indian rupee to be supported by its government measures.

India is considering asking the central bank to offer dollars directly to oil marketing companies or through a state-run bank as part of steps to stem a fall in the rupee, a government source said on Thursday.

Indian markets were closed on Thursday for holiday.

The Thai baht and the Malaysian ringgit edged higher on the day, while China's yuan was little changed as market participants squared positions ahead of a long holiday weekend.

The dollar index inched lower to 94.505 near its seven-week low of 94.308 touched on Tuesday, while the U.S. bond yields were hovering near four month highs.

(Reporting by Patturaja Murugaboopathy in Bengaluru; Editing by Sam Holmes)