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ASIA-MARKETS-UPDATE
Indian rupee touches record low as Asia markets tumble
HONG KONG, Aug 31, 2018 (BSS/AFP) – Emerging market currencies sank in
Asia on Friday, with the Indian rupee at a record low as dealers fear
contagion from financial crises in Argentina and Turkey.
A report that Donald Trump is planning to impose tariffs on a further $200
billion of Chinese imports as soon as next week has added to the fright on
trading floors, with most equity markets across the region also down.
Forex traders have been dumping emerging market currencies after
Argentina’s peso became the latest to hit the buffers on concerns about the
country’s economy.
The peso hit a record low near 40 to the dollar Thursday despite the
central bank hiking interest rates 15 percentage points to 60 percent. It has
lost 53 percent of its value since the start of the year as the government of
President Mauricio Macri faces a financial catastrophe.
At the same time Turkey’s lira continues to face heavy selling after a
deputy central bank governor resigned with the economy facing a possible
recession, made worse by US sanctions. The currency has also lost about half
its value this year.
The flight out of emerging market units hit India, where the rupee fell to
71 against the dollar for the first time on Friday. The embattled currency
has has lost about 10 percent this year.
And the Indonesian rupiah also dived, briefly hitting the 14,750 to the
dollar mark seen during the Asian financial crisis in 1998.
Both countries’ problems have been exacerbated by ballooning current
account deficits, while a series of interest rate hikes has failed to staunch
the selling in their currencies.
“The spillover from the resurfacing emerging-market turmoil in the
Argentina peso and Turkish lira is weighing on EM Asia currencies,” Ken
Cheung, senior FX strategist at Mizuho Bank in Singapore, told Bloomberg
News.
– New tariffs in view –
Other emerging market and high-yielding currencies were also in the red
with South Korea’s won down 0.4 percent, Australia’s dollar 0.6 percent down
and the South African rand 0.8 percent off.
Global markets have gone into reverse since Bloomberg said Trump wanted to
impose the new levies on Chinese goods as soon as public consultation ends
next week. The move would add to the $50 billion already levied.
The report follows talks last week between the world’s top two economies –
– the first on trade since they began exchanging tit-for-tat tariffs in July
— ended with no breakthrough and will rekindle fears of a painful trade war.
All three major Wall Street indexes ended down, with the S&P 500 and
Nasdaq ending a streak of four straight days of records.
Tokyo ended marginally lower, while Hong Kong sank one percent and
Shanghai lost 0.5 percent. A better-than-forecast reading on Chinese
manufacturing activity was unable to lift the gloom.
Sydney fell 0.5 percent, while Singapore was off 0.2 percent. Wellington,
Taipei, Manila and Jakarta were also sharply lower but Seoul rose 0.7
percent.
Global markets had started the week on a high, fuelled by hopes for a new
Canada-US-Mexico trade pact and easing Brexit fears
“One thing’s for sure — Sino-US trade developments are destined to be the
defining feature of September’s markets,” said Ray Attrill, head of foreign-
exchange strategy at the National Australia Bank.
“We are inclined to take the headlines that Trump is minded to announce
his intentions to ratchet up tariffs on China as early as next week at face
value.”
Trump’s latest comments come ahead of a summit between Trump and Chinese
President Xi Jinping in November, with some observers saying they are part of
a strategy by the tycoon to win concessions.
In early European trade London and Paris each fell 0.3 percent, while
Frankfurt was 0.6 percent off.
– Key figures around 0810 GMT –
Dollar/Indian rupee: UP at 70.88 rupees from 70.74 rupees
Dollar/Indonesian rupiah: UP at 14,710 rupiah from 14,680 rupiah
Tokyo – Nikkei 225: FLAT at 22,865.15 (close)
Hong Kong – Hang Seng: DOWN 1.0 percent at 27,888.55 (close)
Shanghai – Composite: DOWN 0.5 percent at 2,725.25 (close)
London – FTSE 100: DOWN 0.3 percent at 7,493.82
Euro/dollar: UP at $1.1675 from $1.1666 at 2100 GMT
Pound/dollar: UP at $1.3015 from $1.3009
Dollar/yen: UP at 111.02 yen from 111.01 yen
Oil – West Texas Intermediate: DOWN three cents at $70.22 per barrel
Oil – Brent Crude: DOWN 17 cents at $77.60
New York – Dow Jones: DOWN 0.5 percent at 25,986.92 (close)
BSS/AFP/HR/1430