Most emerging Asian currencies traded flat to lower on Wednesday, with the South Korean won weakening the most as investors looked for signs of a breakthrough in US-China trade negotiations. US Trade Representative Robert Lighthizer said on Tuesday he hopes the United States and China are in the final weeks of talks to secure a deal to ease a trade war between the world's largest economies, but cautioned that major issues remained.
Investors will also keep a close watch on key industrial output data from China for the first two months of the year due on Thursday. Last week, China reported dismal trade data with February exports plunging 20.7 percent from a year earlier, pointing to further weakness in domestic demand and concerns about a slowdown in global growth.
Leading declines in the region, the trade-sensitive South Korean won slipped as much as 0.3 percent against the greenback, in tandem with the local equity benchmark index. The KOSPI index fell more than 1 percent earlier on Wednesday. South Korea's export-reliant economy stands to gain highly from any positive development in the US-China trade war front, as it is largely affected by demand from both countries.
The Malaysian ringgit weakened 0.2 percent, while the Singapore dollar was marginally lower. Meanwhile, higher global crude oil prices put the region's net importers under pressure, with the Indonesian rupiah dropping as much as 0.2 percent, while the Indian rupee was largely flat.
India's annual consumer prices rose at a faster pace than anticipated, but remained below the central bank's target for a seventh straight month, lending weight to expectations that the central bank could once again cut the key interest rate in April. The peso traded flat after rising as much as 0.7 percent earlier. Gao Qi, a forex strategist at Scotiabank, attributed the day's early gains to a correction, as the USD-PHP pair had been overbought.
The local unit declined 0.8 percent last week, after the newly-appointed central bank chief Benjamin Diokno said there was room to ease monetary policy given cooling inflation. Diokno on Tuesday raised the possibility of several cuts this year in the amount of cash that banks must hold as reserves, and that the current reserve requirement ratio of 18 percent was still too high despite two cuts last year.
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