Asian currencies largely up

Emerging Asian currencies were largely up on Tuesday though most regional units were set to post losses in May, dragged by expectations of an imminent US interest rate hike with the Chinese yuan on course for the worst month since Beijing's surprise devaluation in August last year. Indonesia's rupiah gained for the day on sustained foreign stock buying, while South Korea's won ticked higher on exporters' demand for month-end settlements.
Those gains came as emerging Asian currencies nursed monthly losses, mainly reflecting Federal Reserve Chair Janet Yellen and top policymakers in the US central bank supporting a rate increase in the near term. "We'll get some pull back (in dollar/Asia FX) going into US payrolls on Friday but as long as that meets expectations, I expect USD to strengthen versus Asia into FOMC," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore.
Yokota, however, said the dollar may weaken after the Federal Open Market Committee meeting as investors have priced in a near-term US tightening. "Assuming we don't get a blockbuster payroll number, which is 300K or more, we think it will be buy the rumour, sell the fact and USD will weaken post FOMC," Yokota said. Economists expected US nonfarm payrolls to have risen by 166,000 this month after an increase of 160,000 in April, according to a Reuters poll. China's yuan has fallen 1.6 percent on the dollar so far this month - the largest monthly slide since August last year when policy makers unexpectedly devalued the currency.
The central bank on Tuesday set its daily guidance rate at a five-year low for a second session, while traders grappled with fresh signs that the recovery in the world's second-largest economy may be losing steam. The weak renminbi dragged the Singapore dollar lower by 2.6 percent in May, which would also be the biggest monthly slump since August last year.
The city-state's currency closely tracks the yuan as traders and analysts believe the Chinese unit to be a part of the undisclosed currency basket used by the Monetary Authority of Singapore to manage its monetary policy. Malaysia's ringgit led regional losses, having slumped 5.2 percent against the US dollar so far May on stocks outflows and persistent concerns about troubled state fund 1Malaysia Development Bhd (1MDB). If maintained, that would be the largest monthly loss since August last year when a graft scandal linked to Prime Minister Najib Razak and 1MDB intensified.
The won has slid 4.3 percent versus the greenback so far this month, making May the worst month since July 2015. South Korea's central bank is expected to cut interest rates soon to help the economy pick up pace. Industrial output in April already fell for a second straight month and at a faster-than-expected pace. The South Korean currency came under further pressure from speculation that some foreign equity funds could move to China if benchmark provider MSCI includes Chinese stocks in its emerging market index.
The rupiah has fallen 3.2 percent so far this month as foreign investors turned to being net sellers with the country seen as particularly vulnerable to the Fed's rate hike. Thailand's baht has lost 2.3 percent, which would be the largest monthly loss since July 2015. The baht fell on bond outflows and as the country's conglomerate Central Group accumulated foreign currency to buy a Vietnam business from France's Casino for 1 billion euro ($1.11 billion). The Indian rupiah has shed 1.2 percent, while the Taiwan dollar has eased 1.0 percent.