Most firm as dollar weakens on Cohn departure; South Korean won leads

By Aaron Saldanha

(Reuters) - Most Asian currencies firmed on Wednesday as the dollar weakened as the news U.S. President Donald Trump's economic adviser Gary Cohn is resigning caused fears of fresh tariffs and a trade war.

While equities in Asia slipped as the likelihood of U.S.-imposed steel and aluminium tariffs resurged in the wake of Cohn's resignation, the dollar's weakness helped many Asian currencies firm.

The dollar index, measuring the currency against a group of currencies, was at 89.47, near the two-week low hit on Tuesday.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent on the day.

"There are some concerns of trade tensions escalating into a trade war...hence the response seen in equity markets," said Christopher Wong, an FX strategist with Maybank.

 

"However, foreign exchange markets are not so clear cut."

The South Korean won was the region's biggest gainer for the second day as it firmed 0.65 percent; following about 0.57 percent gain on Tuesday. North Korea's potential denuclearisation move has supported the currency in the past few days.

Wong said the currency's movement was a trade-off between "geopolitical tensions easing versus trade tensions rising."

The Malaysian ringgit gained for a second straight day, ahead of Bank Negara Malaysia's (BNM) meeting later on Wednesday. It firmed 0.03 percent.

The consensus remains that the central bank will not raise the overnight policy rate but its relative rate path transparency means traders are likely to closely watch BNM's forward guidance.

China's yuan weakened as much as 0.34 percent, the most since March 1. The country is a major steel producer and a frequent target of U.S. President Trump's trade rhetoric.

The Chinese central bank set the strongest daily fix since Feb. 28 at 6.3294 per U.S. dollar. The yuan had firmed slightly on Tuesday as trade war fears temporarily subsided. [CNY/]

Meanwhile, in the special administrative region of Hong Kong, the local dollar saw a fresh all-time low of 7.835 to the U.S. dollar, weakening for the fifth straight session.

"While the tariffs have yet to be signed into law, it has become increasingly clear that America's major trading partners are unlikely to tolerate U.S. trade protectionism," said Eugene Leow, rates strategist, and Philip Wee, FX strategist, at DBS Bank, in a note. They cited possible European retaliation as fuelling a further escalation of trade tensions.

"Risk sentiment is likely to be heavily dictated by how far Trump is willing to go with his protectionist stance."

While, the Indonesian rupiah firmed 0.06 percent, the Indian rupee and Singapore dollar traded flat.

TAIWAN DOLLAR

The Taiwan dollar was 0.14 percent firmer ahead of inflation and trade data being released later on Wednesday.

Exports for February are expected to grow for a 17th straight consecutive month, albeit at a slower rate, according to a poll of analysts by Reuters.

Inflation in February is forecast to have climbed to 1.6 percent from a year earlier, up from 0.88 percent growth in January, the poll showed.

PHILIPPINE PESO

The Philippine peso recovered from early falls to firm 0.05 percent. At worst, it touched its lowest in a week.

Inflation in February quickened as per data released on Tuesday. The prospects of the central bank on March 22 raising rates make for the Philippine peso being a much watched currency in the fortnight ahead.

(Reporting by Aaron Saldanha in Bengaluru; Editing by Gopakumar Warrier)