Investing.com — Asian currencies traded mixed on Tuesday, with the yuan weakening after the People’s Bank of China moved to slow its recent appreciation.
The South Korean won rebounded and the U.S. dollar held near a one-month low as investors weighed falling oil prices and the U.S. midterm elections.
The U.S. dollar index was little changed at 101.80. The USD/KRW pair fell 0.5% to 1,339.30, leaving the won stronger, while the USD/CNH pair rose 0.3% to 6.6690 and the onshore USD/CNY pair gained 0.3% to 6.6702. The yen was little changed at 157.88 per dollar in holiday-thinned Japanese trading.
The yuan’s decline followed the PBOC’s decision to lift the foreign-exchange reserve requirement ratio by two percentage points to 6% from 4%, effective November 15. The adjustment is expected to withdraw around $24 billion from the financial system by absorbing some of the dollar liquidity held by banks. The offshore yuan is on track for its first decline in almost three weeks.
The currency has nevertheless gained more than 5% against the dollar this year, making it one of Asia’s strongest performers, supported by robust exports, trade surpluses and corporate currency conversions.
Dollar struggles to benefit from risk aversion as oil prices slide
DBS analysts said the dollar had failed to draw much support from renewed risk aversion as investors entered November cautiously ahead of Tuesday’s U.S. midterm elections.
Brent crude fell more than 7% on Monday after Tehran said contacts with Washington aimed at ending the eight-month conflict were continuing. Reports of diplomatic engagement involving Iran and Qatar also raised hopes of progress towards a resolution and more stable Middle Eastern oil supplies.
Beyond the election result, investors will assess whether cheaper oil and Friday’s October U.S. employment report give the Federal Reserve enough reason to reconsider its tightening bias.
The won’s rebound follows a sharp quarterly advance of around 13% against the dollar in the third quarter, its strongest gain since late 1998.
South Korea’s October exports surged 93.7% year-on-year, driven by a 259.4% jump in semiconductor shipments, while inflation eased to 2.8% from 2.9%.
