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EMERGING MARKETS-Strong dollar dents Asian FX; rupiah, won hurt by bond outflows

Anushka Trivedi
·3-min read

(.) * Graphic: World FX rates http://tmsnrt.rs/2egbfVh * S. Korean won leads decline, stocks up ~3% * Most Asian equities set to post biggest weekly gains since Nov * Singapore shares lifted by banks By Anushka Trivedi Jan 8 (Reuters) - Indonesia's rupiah and the South Korean won led declines in Asian currencies on Friday as climbing U.S. yields lifted the greenback's appeal, while most stock indexes were set to end the first week of the new year higher. The rupiah and the won, both eased about 0.7% as investors dumped the countries' bonds in favour of U.S. debt, while the Malaysian ringgit and the Thai baht fell 0.1% and 0.4%, respectively. The rupiah, which underpins one of Asia's most popular bond markets for foreign investors, hit a more than one-week low. Indonesia's 10-year benchmark yields were up 23.1 basis points at 6.26%, their highest in more than a month. Yields rise when bond prices fall. "The rebound in the dollar overnight, helped in part by rising U.S. bond yields, has seen Asian currencies open weaker today," said Khoon Goh, head of Asia research at ANZ. The won was set to mark its worst day since November despite a rally in local stocks bringing inflows as long positions in the currency were unwound, Goh added. The Treasury yield curve steepened, indicating continued economic expansion, as yields on the longer end of the curve stayed over 1% after Democrats won control of the U.S. Senate on Wednesday, raising hopes for more fiscal stimulus. The dollar found some support overnight, but analysts expect this bounce to be temporary, banking on vaccine rollouts to support economic growth in Asia and appreciation in the currencies. Equities in Asia continue to ride on U.S. stimulus euphoria in tandem with global markets, on expectations that more fiscal spending in the world's biggest economy will spur trade and investment. Most regional indexes were on course to notch their best week since mid-November. Seoul's benchmark led gains as it surged almost 3% to take this week's gains to a whopping 8.6%, set for its best weekly performance since March. Singapore shares, which had failed to join in the year-end rally in 2020, rose 1.8% to a ten-month peak, with financials tracking their U.S. peers to drive gains. HIGHLIGHTS ** China stocks retreat from a 13-year high on rising Sino-U.S. tensions ** The most liquid 3-year Korean treasury bond yield rose by 2.4 basis points to 0.987% ** Top gainers on the Singapore STI: United Overseas Bank Ltd up 3.1 %, DBS Group up 2.8% and Oversea-Chinese Banking Corporation Ltd up ​2.7% Asia stock indexes and currencies at 0441 GMT COUNTRY FX RIC FX DAILY % FX YTD % INDEX STOCKS DAILY % STOCKS YTD % Japan -0.05 -0.59 1.75 1.92 China +0.17 +0.95 -0.62 2.33 India -0.03 -0.39 0.74 1.86 Indonesia -0.64 +0.43 1.66 4.63 Malaysia -0.12 -0.50 -0.17 -1.66 Philippines +0.05 -0.14 1.86 1.57 S.Korea -0.75 -0.85 2.74 8.40 Singapore -0.08 -0.36 1.81 4.07 Taiwan +1.51 +1.71 1.23 4.54 Thailand -0.37 -0.50 1.25 5.75 (Reporting by Anushka Trivedi in Bengaluru; Editing by Karishma Singh)