Most currencies softer as recession fears grip markets

Most Asian currencies weakened on Thursday as recession warnings from the U.S. bond market dented investor risk appetite, cutting short a modest respite after the United States delayed some tariffs on imports from China.

The U.S. Treasury 30-year bond yield slumped below 2% for the first time on Thursday as fears of a global recession gripped financial markets and drove investors towards safe haven assets.

Most regional units had appreciated on Wednesday as U.S. President Donald Trump’s decision to delay tariffs eased tensions in the Sino-U.S. trade war, as the currency markets also shrugged off weak numbers from a raft of Chinese data.

“Any positives from Trump’s partial delay in tariff imposition looks to be quickly forgotten. Overall, the climate remains stacked against the Asian currencies,” said OCBC Bank in a note, while underscoring growth worries and aversion to riskier assets.

Fresh global growth worries now warrant more monetary easing from the U.S. Federal Reserve, while the persistent trade war pressure may also force Beijing to implement more aggressive stimulus steps to bolster growth.

Maybank analysts said in a note that given the complex state of geopolitical risks now, sharp swings in sentiment could be more common going forward.

The Indonesian rupiah weakened as much as 0.5% to 14,305 against the dollar despite a modest improvement in economic fundamentals.

Data from Indonesia’s statistics bureau showed Southeast Asia’s largest economy posted a smaller-than-expected trade deficit in July after two months of surpluses.

The Philippine peso depreciated up to 0.3%, while the Thai baht and the Malaysian ringgit lost as much as 0.2% each.

Indian and South Korean markets were closed for a holiday.

TRADE HOPES DIM

The Chinese yuan edged lower after posting its best intraday percentage gain in nearly eight weeks in the previous session on the Trump administration’s tariff delay decision.

However, optimism over a modest easing in trade tensions evaporated in no time as Trump tied protests in Hong Kong to a trade deal with Beijing, urging China to seek a human resolution to the city’s months-long political crisis.