Asian emerging currencies traded cautiously on Tuesday as the dollar loitered near a two-decade peak, while Philippine shares led regional losses with a more than 4% decline on growing economic headwinds.
A softer dollar boosted appetite for risk-sensitive Asian markets. The US dollar index, which measures the greenback against a basket of six majors, eased 0.2% to 113.67, pulling back from a 20-year high of 114.58 struck on Monday.
However, the dollar has gained about 20% so far this year on the back of higher interest rates and its unrelenting rally has weighed heavily on the region’s emerging currencies, with most of them nursing heavy losses this year.
South Korea’s won and Singapore’s dollar rose 0.3% and 0.2%, respectively.
The Philippine peso and India’s rupee firmed 0.1% and 0.4%, respectively.
The peso, which is down 13.5% this year and is the second-worst performing currency in the region, was up marginally after a 0.5% depreciation the previous day, while equities touched their lowest level since October 2020.
The International Monetary Fund on Monday warned that the Philippine economy would grow more slowly this year than previously thought due to the global economic slowdown and tightening financial conditions.
The Bangko Sentral ng Pilipinas so far this year has raised interest rates by a total of 225 basis points to bring inflation within its target range of 2% to 4%.
Asian currencies weaken as investors brace for series of central bank meetings
In regional currency markets, China’s yuan, which has lost about 11% so far this year, fell the most by 0.4%, weighed down by more evidence of slowdown in the world’s second-largest economy.
Profits at China’s industrial firms shrank at a faster pace of 2.1% in January-August from a year earlier.
“Monetary policy divergence and growth differential could continue to keep the yuan on the backfoot,” analysts at Maybank said in a note.
“Xi’s dynamic COVID zero policy has also dampened confidence notwithstanding recent upside surprise in the activity data,” the analysts said, referring to Chinese President Xi Jinping’s strict pandemic measures that have led to lockdowns of cities and shut down factory operations across the country.
Meanwhile, Indonesia’s rupiah and Malaysia’s ringgit were among top losers, depreciating 0.2% each, while the Thai baht was flat.
Indonesia’s rupiah hit a more than two-year low. It has lost about 6% so far this year against the dollar.
A senior official said on Monday that Bank Indonesia would be ready with its “triple intervention” in the foreign market to prevent any excessive fall in the rupiah currency.
Stocks in Jakarta shed 0.4%, while equities in Kuala Lumpur advanced 0.1%.
South Korea’s benchmark index and Singapore’s equities dropped 0.6% each. Stocks in Mumbai rose 0.7%, while Thailand’s benchmark index was flat.
Highlights:
** Indonesia’s benchmark 10-year yields rise by 6.3 points to 7.406%
** Thai c.bank monitoring baht weakness, no big worry yet - finmin
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