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EM ASIA FX-Asian currencies drop on trade worries, falling U.S. yields

(Adds text, updates prices)

By Patturaja Murugaboopathy

Dec 5 (Reuters) - Asian currencies weakened on Wednesday,

with optimism over a U.S.-China trade truce fading amid rising

concerns an inversion of the U.S. Treasury yield curve points to

potential recession.

Regional currencies were bolstered earlier this week as

leaders of world's two largest economies agreed to a 90-day

truce to their trade war, however, a lack of specific details

has raised questions over the durability of the deal.

"Optimism surrounding the temporary trade ceasefire fades as

doubts about durability of the truce grow when Trump's economic

adviser backtracked from an earlier announcement that China had

agreed to lower tariffs on U.S.-made cars," said Zhu Huani,

economist at Mizuho Bank.

"Whilst Trump suggested that he might extend the 90-day

truce or impose tariffs if no deal is reached, this reinforces

concern that both sides are just kicking the can down the road."

Trump threatened on Tuesday to place "major tariffs" on

Chinese goods imported into the United States if his

administration is unable to reach an effective trade deal with


Also, investors remained nervous over an inversion of the

yield curve between three-year and five-year U.S. Treasury notes

and between two-year and five-year notes.

The yield spread between the U.S. 2-year and 10-year

tightened to its smallest since July 2007 this week. A flatter

yield curve is seen as an indicator of a recession.

Analysts said a slowing U.S. economy would affect Asian

markets as a whole, as many countries in the region are reliant

on their exports to the United States.

The Indonesian rupiah declined about 1 percent, hit

by higher crude oil prices, while the South Korean won

also fell 0.9 percent.

The Philippine peso shed nearly half a percent

after annual inflation eased in November for the first time in

almost a year, reducing pressure on the central bank to raise


China's yuan also slumped after gaining nearly 2

percent in the first two days of this week, while the Singapore

dollar and the Taiwan dollar dropped about a

quarter of a percent each.


The Indian rupee fell 0.23 percent against the

dollar, ahead of its central bank policy meeting later on


Analysts expect the Reserve Bank of India to leave interest

rates unchanged to support the economy that is losing momentum.

Economic growth slowed sharply in the July-September

quarter, when annual growth slipped to 7.1 percent from a more

than two-year high of 8.2 percent in the previous quarter, data

showed last week.

"In the coming quarters, government consumption is expected

to remain strong ahead of the general elections next year, but

other components of growth may continue to drag down overall

growth," MUFG Bank said in a note.

The following table shows rates for Asian currencies against

the dollar at 0529 GMT.


Change as of 0529


Currency Latest Previous Pct

bid day Move

Japan yen 113.020 112.77 -0.22

Sing dlr 1.368 1.3650 -0.19

Taiwan dlr 30.797 30.705 -0.30

Korean won 1115.00 1105.3 -0.87


Peso 52.780 52.52 -0.49

Rupiah 14425.0 14285 -0.97


Rupee 70.590 70.49 -0.14

Ringgit 4.156 4.145 -0.26

Yuan 6.862 6.8375 -0.36

*Thai markets closed

for holiday

Change so far in


Currency Latest End 2017 Pct

bid Move

Japan yen 113.020 112.67 -0.31

Sing dlr 1.368 1.3373 -2.22

Taiwan dlr 30.797 29.848 -3.08

Korean won 1115.00 1070.50 -3.99


Baht 32.700 32.58 -0.37

Peso 52.780 49.93 -5.40

Rupiah 14425.0 13565 -5.96


Rupee 70.590 63.87 -9.52

Ringgit 4.156 4.0440 -2.69

Yuan 6.862 6.5069 -5.18

(Reporting by Patturaja Murugaboopathy in Bengaluru

Editing by Jacqueline Wong)