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Asian FX edges higher as dollar weakens on China growth hopes

Asian currencies overcame early market

Asian FX edges higher as dollar weakens on China growth hopes pressure to edge higher against a tepid U.S. dollar on Monday, while the Singaporean dollar rose to a 2-1/2-week high after data showed the city-state witnessed its fastest rise in core inflation in a decade.

South Korea’s won and the Taiwanese dollar rose 0.3% and 0.1%, respectively, while the Thai baht and Philippine peso traded flat.

The dollar weakened against major currencies, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising U.S. rates, while hoping that loosening lockdowns in China can help global growth.

“Chatter of U.S. recession risks and hence less pressure for the U.S. Federal Reserve to tighten aggressively (have seen) rate hike bets and USD longs unwind,” said Christopher Wong, senior FX strategist at Maybank.

Relative stabilization of the yuan, pullback in U.S. Treasury yields, China’s unexpectedly large borrowing rate cut for mortgages on Friday and signs of Shanghai reopening have aided sentiment in Asia, Wong said.

The yuan, which last week recorded its biggest weekly jump since October 2020, hit its highest since May 5 on Monday.

Risk sentiment got a lift after U.S. President Joe Biden said Washington may cut tariffs on imports from China.

Singapore’s core inflation rate — the central bank’s favored price measure – rose to 3.3% in April on a year-on-year basis, the highest since February 2012, driven by higher food prices. A Reuters poll of economists had forecast a 3.4% increase.

“Price pressures are expected to remain elevated in the near term, although pressure on the Monetary Authority of Singapore to resort to additional tightening may have abated somewhat as actual inflation slipped below market consensus,” analysts at ING said in a note.

The Singaporean dollar appreciated 0.4%.

Stocks in the region, however, struggled for direction.

Equities in Bangkok and Taipei were up 0.5% each, while those in Manila and Singapore traded in red.

Stocks in Jakarta dropped more than 1% and were set to snap a four-day winning streak ahead of Bank Indonesia’s policy meeting on Tuesday.

Economists in a Reuters poll predicted the Indonesian central bank will wait a few more months to raise rates from a record low despite rapid inflation and aggressive tightening by the U.S. Fed.

Separately, Indonesia is due to resume exports of palm oil later in the day after a ban of more than three weeks, but industry traders and companies were awaiting details on accompanying rules to secure domestic supplies of the edible oil to control cooking oil prices.

HIGHLIGHTS

** Singapore dollar, Chinese yuan hit highest since May 5

** Taiwan’s export orders fell for the first time in 25 months in April

** South Korea’s exports for the first 20 days of May jumped 24.1% year-on-year

Asia stock indexes and currencies at 0714 GMT

COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY YTD % DAILY YTD %

% %

Japan +0.19 -9.82 0.98 -6.22

China +0.41 -4.65 0.03 -13.53

India -0.07 -4.22 0.75 -5.56

Indonesia -0.07 -2.80 -1.18 3.87

Malaysia +0.16 -4.93 -0.07 -1.24

Philippines +0.04 -2.28 -0.87 -6.10

S.Korea +0.32 -5.96 0.31 -11.09

Singapore +0.36 -1.90 -0.41 3.32

Taiwan +0.11 -6.53 0.07 -11.32

Thailand +0.00 -2.54 0.62 -1.49
Source: Reuters (Reporting by Harish Sridharan in Bengaluru; Editing by Sherry Jacob-Phillips)

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