Most Asian Currencies Gain

Most Asian currencies strengthened on Monday, as the dollar struggled near 3-1/2 week lows after closely-watched US wages indicators disappointed the market.

Riskier assets globally, including the regional currencies, took some respite from an escalation of the Sino-US trade dispute after both countries on Friday slapped tit-for-tat tariffs on each others' goods, Reuters reported.

"The relief is that markets have not lurched down a cliff on fears of a full-blown trade war... Perhaps on hopes that returning to the negotiation table to soften the blow is still an option," Japan's Mizuho Bank analysts said in a note.

However, they warned, "the calm after the storm remains as tentative as it is tenuous, and certainly no lasting relief from better than expected US jobs data should be expected."

Steady wage gains in the US pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases this year.

Taiwan's dollar gained 0.4% against its US peer, hours ahead of exports data which is expected to show solid, albeit slightly moderating growth.

The Indian rupee, the worst performing Asian currency this year, was up 0.3%. Inflationary concerns from higher oil prices and the fiscal cost of a recent hike in minimum support prices, a government program that buys crops from farmers, are expected to cap gains.

"A confluence of a challenging external environment, high oil prices and likelihood of expansionary domestic policies keep the August hike risks on the table," India's DBS Bank said in a note.

Indonesia's rupiah firmed 0.2% to 14,338. Perry Warjiyo, the country's central bank governor, flagged US-China trade tensions as a concern to growth.

Bank Indonesia has raised its benchmark rate by 100 basis points so far this year to defend a fragile rupiah. The government also recently announced a plan to review capital goods imports to control the current account deficit.

The Philippine peso slipped to 53.410 against the dollar after gaining 0.2% on Friday.

Data showing stronger-than-expected inflation earlier last week added to increasing pressure on Bangko Sentral ng Pilipinas to hike rates over and above the two made this year.

Trade data for May, expected on Tuesday, should provide a cue for investors, after April's deficit widened to a four-month high and added further strain on the struggling peso.

China’s Priority

The Chinese yuan, which has been hit hard recently amid the intensifying Sino-US trade row, was 0.4% firmer at 6.623 per dollar as investors looked ahead to a data-heavy week.

"Growth remains the mainland's biggest priority hence the markets will be extremely focused on this week's China tier one economic data dump which will provide some exacting signpost for evaluating China's economy," said Stephen Innes, head of trading APAC at Oanda, an online trading firm.

China's foreign exchange reserves unexpectedly rose $1.51 billion in June to $3.112 trillion, bolstered by an increase in the value of its US Treasury holdings.

Inflation, loans and merchandise trade data are also due this week.

Rough Time for ASEAN

Southeast Asian currencies have had a rough year so far but the pressure on them could ease in coming months as trade tensions settle, returning focus to the region's strong growth prospects and the fundamentals weighing on the US dollar, Nikkei reported.

Many banks say that the outlook is positive for the Singapore dollar, the Malaysian ringgit and the Thai baht since the three countries all have a current account surplus that is beneficial for their currencies.

However, banks are divided about the prospects for the Indonesian rupiah and are generally negative about the Philippine peso.

Credit Suisse believes a full-fledged trade war between the US and its trading partners is unlikely since further escalation would cause businesses to defer investments and close plants, hurting prospects for President Donald Trump's supporters in congress during the upcoming mid-term elections. Besides China, the US is also embroiled in spats with Canada, Mexico and the European Union.

"We do believe that after the illiquid summer months (of July and August) have passed, we are likely to see a reversion," John Wood, the Swiss bank's chief investment officer for Asia Pacific, said at a briefing Monday.

As for the US, the worsening trade and government deficit could again start to weigh on the greenback and drive funds back to Southeast Asian countries, Credit Suisse added.