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Asia FX softer, yuan gains on trade deal hopes

A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/Files

By Nikhil Nainan

(Reuters) - Most Asian currencies were slightly weaker on Monday, with the exception of the Chinese yuan, as investors anticipated an imminent resolution to the U.S.-China trade dispute and new policies from Beijing aimed at boosting Asia's largest economy.

The yuan strengthened 0.3 percent to 6.691 per dollar on expectations that the United States and China were close to striking a deal to roll back tit-for-tat tariffs, paving the way to end a bitter year-long dispute.

Washington could lift most or all of its tariffs on China, while a summit between the country's two leaders could happen later this month, the Wall Street Journal reported on Sunday.

While the news boosted sentiment in the yuan, its peers drifted lower as optimism for a deal were largely priced in.

"We would suspect that much of the recent developments on the trade deal discussions have already been priced in," said Julian Wee, an investment Strategist at Credit Suisse based in Singapore.

"The market is likely to wait for the final outcome before reacting. What was crucial was that the tariff rate hike to 25 percent be avoided – that has now very likely been priced into the FX rate," Wee said.

Meanwhile, investors will also be closely watching China's annual parliamentary meeting starting on Tuesday that may provide details on how Beijing plans to reignite its slowing economy as well as its economic growth targets over the year.

The Philippine peso rose 0.1 percent to 51.820 per dollar, surrendering most of its earlier gains.

The country is set to release inflation data on Tuesday, which may indicate whether inflation is within the central bank's 2-4 percent target range, after it paused its tightening cycle in December.

On the other hand, the Thai baht fell 0.3 percent to its weakest against the dollar in more than a month.

The baht has been the region's second-best performer this year, but this has raised concerns that a stronger currency could harm Thailand's export growth.

The Malaysian ringgit was little changed at 4.071 to the dollar.

Malaysia's exports posted better-than-expected growth in January, which widened the country's trade surplus to 11.5 billion ringgit.

Indian markets were closed for a public holiday. The rupee gained last week, despite rising tensions with Pakistan that fuelled worries of a conflict between the two nuclear-armed neighbours.


CHINA IN SPOTLIGHT

"Focus is expected to shift from easing trade tensions to China's slowing economy," DBS bank said in a note.

As China prepares for the annual meeting of the National People's Congress, China's parliament, investors are watching for any announcement on stimulus measures to reverse decades-low economic growth.

"We expect China to disclose its 2019 growth target, which could be as low as 6 percent. This would signal that the recent stimulus is meant to stabilise growth, not boost it," said Credit Suisse's Wee.


CURRENCIES VS U.S. DOLLAR

Change on the day at 0500 GMT

Currency Latest bid Previous day Pct Move

Japan yen 111.950 111.9 -0.04

Sing dlr 1.353 1.3549 +0.11

Taiwan dlr 30.808 30.775 -0.11

Korean won 1125.500 1124.7 -0.07

Baht 31.770 31.69 -0.25

Peso 51.820 51.88 +0.12

Rupiah 14120.000 14110 -0.07

Ringgit 4.071 4.072 +0.02

Yuan 6.691 6.7078 +0.25


Change so far in 2019

Currency Latest bid End 2018 Pct Move

Japan yen 111.950 109.56 -2.13

Sing dlr 1.353 1.3627 +0.69

Taiwan dlr 30.808 30.733 -0.24

Korean won 1125.500 1115.70 -0.87

Baht 31.770 32.55 +2.46

Peso 51.820 52.47 +1.25

Rupiah 14120.000 14375 +1.81

Ringgit 4.071 4.1300 +1.45

Yuan 6.691 6.8730 +2.72


(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Jacqueline Wong)