Investing.com-- Most Asian currencies weakened on Friday, pressured by a rebound in the dollar amid increased bets on a deescalation in U.S. President Donald Trump’s trade policies.
The Chinese yuan showed little reaction to stronger-than-expected Chinese trade data for April, which showed Beijing’s export growth remained robust despite a bitter tariff exchange with Washington. U.S.-China trade talks are also set to take place over the weekend.
The yuan, along with most Asian units, was set to lose ground this week as the dollar rebounded further off recent three-year lows.
The Indian rupee was among the worst performers for the day, losing ground amid continued hostilities between New Delhi and Islamabad. Concerns over worsening relations between the two nuclear armed neighbors also kept risk appetite subdued.
Dollar buoyed by trade deal optimism, set for positive week
The dollar index and dollar index futures both steadied in Asian trade after clocking strong gains in the past two sessions. The two were also trading up about 0.7% for the week, their third straight week of gains.
The greenback was buoyed chiefly by increased optimism over a deescalation in U.S. trade tariffs, after Trump announced a major trade deal with the UK this week.
While the economic benefits of the deal are expected to be limited, investors hoped that the deal would herald more trade agreements with major economies.
Some analysts, however, appeared more cautious. ING warned that the trade deal with the UK was negligible, and that the U.S. would need to reach an agreement with China to move the dial towards deescalation. China by far faces the steepest U.S. tariffs.
Chinese yuan muted despite strong trade data; US talks loom
The Chinese yuan’s USDCNY onshore pair rose 0.2%, while the offshore USDCNH pair rose 0.1%.
The yuan took little support from data showing a bigger-than-expected increase in Chinese exports, despite headwinds from steep U.S. trade tariffs against Beijing. China’s imports also shrank much less than expected, while its trade balance just missed expectations in April.
The trade data came just ahead of trade talks between Chinese and U.S. officials, which are set to take place in Geneva over the weekend. Trump said that he was open to reducing his steep 145% tariffs on China, if the weekend talks went well.
A New York Post report said Trump could slash Chinese tariffs to 50% by next week.
China’s Vice Minister of Foreign Affairs Chunying Hua said on Friday that the U.S. tariffs were unsustainable and that Beijing was prepared for any outcome from the trade talks.
Broader Asian currencies moved in a flat-to-low range. The Indian rupee’s USDINR pair rose 0.2%, recouping some ground from a rise past 86 rupees. The currency remained fragile as India and Pakistan rapidly escalated military action against each other.
The Japanese yen’s USDJPY pair fell 0.1%, but remained near a one-month high following softer-than-expected overall wage income data, which went against the Bank of Japan’s narrative of higher wages and sticky inflation.
The Australian dollar’s AUDUSD pair was flat, while the South Korean won’s USDKRW pair fell 0.1%.
The Singapore dollar’s USDSGD pair was flat, while the Taiwan dollar’s USDTWD pair fell 0.3% after clocking wild swings over the past week.