Slight dollar recovery weighs on Asian currencies

By Christina Martin

(Reuters) - Most Asian currencies edged lower on Monday, as the dollar index rebounded from a nine-month low against a basket of currencies, which it hit following hawkish comments from central bankers last week.

The dollar index against a group of six major currencies was 0.1 percent higher at 95.729, slightly up from a nine-month trough of 95.470 plumbed on Friday.

"The U.S. dollar bid is up a bit against Southeast Asian currencies from corporate demand following USD-JPY," said Nath Wongsaroj, corporate treasury trader at Mizuho Bank.

The dollar added 0.1 percent to 112.435 yen, having briefly fallen to 111.900 earlier in the session.

The dip was seen as a knee-jerk reaction to Japanese Prime Minister Shinzo Abe's Liberal Democratic Party's historic election defeat in the capital Tokyo on Sunday, signalling potential trouble ahead for the premier.

Wongsaroj added that movement in Asian currencies will be "pretty quiet ahead of the U.S. (Independence day) holiday tomorrow."

In Asian currencies, the Taiwan dollar was the sole gainer in the region, up as much as 0.1 percent, while the Indian rupee fell 0.2 percent.

Indian government bonds yields rose sharply on Monday after the central bank announced an open market sale of debt to remove some of the excess cash left at lenders because of the government's removal of a big part of currency bills last year.

The new 10-year bond jumped as much as 11 basis points to 6.62 percent in early trade, its highest level since June 7, from its close of 6.51 percent.

In Indonesia, the reopening of markets after a long break to mark the end of Ramadan initially pushed the rupiah higher though it later traded flat.

Indonesia's annual inflation rate accelerated slightly in June as demand increased in the days leading to the Eid al-Fitr celebrations at the end of the month, the statistics bureau said on Monday.

CHINESE YUAN

China's yuan weakened against the U.S. dollar on Monday, snapping a four-day winning streak, while the launch of a bond trading scheme between China and Hong Kong had little impact on the market.

The People's Bank of China set the midpoint rate at 6.7772 per dollar prior to market open, weaker than the previous fix at 6.7744.

Traders said Monday's midpoint matched their expectations, and stronger dollar purchases have dragged the spot yuan rate lower in morning trade.

The "Bond Connect" programme between China and Hong Kong kicked off on Monday, linking China's $9 trillion bond market with overseas investors. But the launch had little immediate impact although some analysts said the programme would offer support for the Chinese currency in the long run.

China is due to release June foreign exchange reserves data this Friday, with market watchers expecting to see a fifth consecutive month of expansion.

THAI BAHT

The Thai baht was range-bound after opening higher in early trade as headline consumer prices dipped for a second straight month in June.

Thailand's annual headline consumer prices fell for a second straight month in June, mainly due to lower food prices, government data showed.

"The Bank of Thailand will keep the accommodative rate still to support growth," said Wongsaroj.

The central bank is expected to leave its benchmark interest rate unchanged again at 1.50 percent, where it has been since April 2015, at its meeting on Wednesday.

(Reporting By Christina Martin in Bengaluru; Editing by Sam Holmes)