Emerging Asian exchange rates slipped broadly on Monday with heightening global trade tensions sparking sharp falls in the region's export-correlated currencies. US President Donald Trump said on Friday he was pushing ahead with 25 percent tariffs on $50 billion of Chinese imports, to which Beijing immediately vowed to respond in kind.
However, the dollar index, measuring it against a basket of six major peers, was close to 95.131, a peak scaled on Friday, thanks to the dollar soaring more than 1 percent last week after the US Federal Reserve gave a hawkish signal on interest rates while the European Central Bank struck a dovish tone.
"Asian currencies are facing depreciation pressures on two major fronts...monetary policy divergences have returned to support the US dollar globally. The Fed has affirmed that it will be moving to deliver a total of four, not three, rate hikes this year," Philip Wee, an FX Strategist with DBS Bank Ltd wrote in a note.
The South Korean won fell 0.76 percent and was among the top losers on Monday. The country's economy is highly export-dependent and some investors are already worried about slowing growth. The Philippine peso lost 0.19 percent and the Singapore dollar was 0.05 percent weaker while the Indian rupee marked time.
Chinese, Indonesian and Taiwanese financial markets were closed on Monday for public holidays. Thailand's baht weakened 1.04 percent as a combination of comments by Thai Finance Minister Apisak Tantivorawong and concerns about capital outflows weighed on the currency.
Speaking before the Bank of Thailand's monetary policy review on Wednesday, Tantivorawong said on Monday that he saw no reason for Thailand to raise interest rates.
Those comments sent the baht to its weakest intra-day rate since end-2017. Thailand's 1-day repo rate has been maintained at 1.5 percent for more than three years.
"Thailand is also an export harbour in the region, and any trade tensions can undermine the currency. Any outflows from Thailand (in the bond and equity markets) will also weaken the currency," said Gao Qi, FX Strategist (EM Asia) at Scotiabank.
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