Most currencies soften as trade war fears grow

Most Asian currencies softened on Friday as investors fled riskier assets after a volley of threats between the United States and China escalated fears of a global trade war. Markets had already been skittish ahead of proposed US steel and aluminium tariffs due to come into effect on Friday, although six countries and the European Union were granted temporary exemption.
President Donald Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, while the Chinese commerce ministry unveiled plans to levy duties on up to $3 billion of select US imports. "Most Asian currencies depreciated this week, caught between heightened US-led global trade tensions and a mildly hawkish Fed hike outlook. Although protectionism has yet to dampen the global economic outlook, it has started to incrementally weigh on business and investor sentiment," DBS said in a note.
As such, safe haven buys like the Japanese yen and the Singapore dollar rose. Gold prices were also higher. Equity markets took a large hit from the news, while the dollar extended losses. Asian units however, failed to capitalize on the dollar weakness. The South Korean won fell about 0.7 percent to a near 3-week low against the dollar. The currency was on track for its worst week since early February.
South Korean shares fell to a two-week low. Sentiment was further soured after Trump replaced H.R. McMaster as national security adviser with John Bolton, a hawk who has advocated using military force against North Korea and Iran. The Indonesian rupiah fell about 0.3 percent to the dollar, and was on track to end the week 0.3 percent lower.
Indonesia's central bank on Thursday kept its policy rate unchanged, as expected, and said it remained committed to maintaining a presence in the foreign-exchange market to stabilise the rupiah, which is among the worst performing currencies for the year. On the other hand, the Singapore dollar benefitted from safe haven buying, rising about 0.1 percent. The currency has shown steady growth in 2018, bolstered by strong economic fundamentals in the island state, particularly a strong trade balance.
Singapore's core inflation picked up slightly more than expected in February to a 10-month high, data showed on Friday, adding to the debate over whether the Monetary Authority of Singapore may consider tightening policy at its review next month. Investors increased their bearish bets on the Indian rupee to the highest since 2016, while trimming their long positions in other Asian currencies over the past two weeks, a Reuters poll showed.
Long positions in the Malaysian ringgit decreased and were at their lowest in five months, while long positions in the South Korean won and the Singapore dollar too were scaled back. Bearish bets on the Indian rupee were at their highest since November 2016 as concerns about the country's swelling current account deficit weighed.
The rupee, which fell about 0.1 percent, has also been wracked by a major banking scandal in the country, which prompted investment bank Goldman Sachs to cut its forecasts for India's economy.