BENGALURU: Asian currencies strengthened for the third consecutive day on Friday, supported by a weaker dollar and shifting views over how much damage the Sino-U.S. trade war will inflict on global demand and export-reliant regional economies.
On Tuesday, Washington 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.
However, the initial tariff rates imposed by both sides were lower than expected, with the United States delaying stiffer duties for another few months, reducing the risk of a sudden, sharp blow to the global economy from the escalation.
The dollar index has fallen more than 1 percent this week. Analysts said investment flows are being diverted away from the greenback to its peers such as emerging market currencies as trade tensions have ebbed.
“A significant factor in adding to the current run of dollar weakness is the drop on safe-haven appeal after China suggested they won’t weaponise yuan in a trade war,” said Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore.
“Regional risk is very steady supported by thriving global equity markets, a slightly weaker dollar and a positive glean that North Korea’s leader Kim Jung-un has asked for a second summit with President Trump.”
Analysts said the reports that China will further reduce import tariffs for the majority of its trading partners as soon as next month also supported risk sentiment in the region.
“ASEAN nations may benefit from an expansion of trade with China as trade barriers are reduced, with China possibly reweighting the importance of the region due to the trade war,” said Chang Wei Liang, FX strategist at Mizuho Bank.
The Indian rupee and the Indonesian rupiah drew comfort from their governments’ proposed measures to shore up their currencies this week.
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