BENGALURU: Emerging Asian currencies slipped broadly on Tuesday as fears of fallout on the region from a China-U.S. trade row sparked a flight to safe haven assets from regional currencies.
US President Donald Trump on Monday threatened additional tariffs on Chinese goods in an escalating tit-for-tat trade war between the world's two biggest economies.
Trump warned that Washington would impose a 10 percent tariff on $200 billion of Chinese goods after Beijing's decision to raise tariffs on $50 billion in U.S. goods, which was in retaliation for U.S. tariffs announced on Friday
The Japanese yen, considered a safe haven currency in times of market turmoil, climbed 0.7 percent against the dollar to 109.795 yen, its strongest in a week.
Gold also benefitted with spot prices rising 0.45 percent to $1,283.62 an ounce by 0336 GMT.
Meanwhile, the dollar index, measuring it against a basket of six major peers, wilted as much as 0.3 percent to 94.534 on Tuesday.
"Predictably, investors are running for cover under the haven umbrellas as global equity indices are crumbling under the weight of an escalating trade war," Stephen Innes, head of trading APAC at Oanda, wrote in a note.
China's yuan and the Taiwan dollar weakened, trading for the first time this week. China and Taiwan's markets were closed on Monday for a public holiday while Indonesian financial markets remained shut on Tuesday.
The yuan's 0.17 percent drop was surpassed by a 0.41 percent slide in the Taiwan dollar, the region's worst performing currency on Tuesday. The currency fell to its weakest since mid-November in intraday trade.
The South Korean won slipped 0.03 percent while the Singapore dollar was 0.08 percent lower.
Sino-U.S. trade tensions soured sentiment in India as well, with the rupee losing 0.16 percent.
POLICY REVIEWS
The central banks of Thailand and the Philippines are scheduled to hold meetings to decide monetary policy on Wednesday. While the Thai benchmark rate is expected to be left unchanged, a slim majority of economists believe the Philippine central bank will raise interest rates for the second consecutive meeting.
Thailand's baht weakened again, following a drop of more than 1 percent intra-day on Monday when a combination of comments by the Thai finance minister and capital outflow concerns weighed heavily on the currency.
The minister said on Monday that a weaker baht would help the country and that he saw no reason for Thailand to raise interest rates.
Thailand's 1-day repo rate has been maintained at 1.5 percent for more than three years.
Meanwhile, opinions on the Philippine central bank, Bangko Sentral ng Pilipinas (BSP), potentially raising rates are sharply divided, with the weak peso likely to be the factor that will tilt the scale.
"The negative feedback loop, where a continuously weak PHP widens trade deficit which then further suppresses the currency, could ultimately threaten the inflation target via higher import prices," Zhu Huani, a market economist at Mizuho Bank, Ltd wrote in a note.
The Philippine peso held steady on Tuesday, but remained not far from a 12-year low that it touched on Monday. - Reuters
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