Most Asian currencies up

Most Asian currencies strengthened on Tuesday as the dollar struggled in the face of falling Treasury yields and growing expectations of a near-term interest rate cut by the Federal Reserve. The dollar slipped to a five-month low against the yen earlier, setting the tone for much of the regional currencies.
The benchmark 10-year Treasury yield fell to its lowest level since September 2017 overnight, coming within reach of the 2% threshold after St. Louis Federal Reserve President James Bullard said a rate cut "may be warranted soon" given the rising risk to economic growth posed by global trade tensions as well as weak US inflation. The strong "likelihood of Fed rate cuts has weighed on the dollar, while boosting EM Asian currencies," said Qi Gao, Asia FX Strategist at Scotiabank.
Trade worries have taken a bit of a backseat for regional currencies this week as investors focused on falling US yields and searched for better returns outside. "We expect USD-Asia to have an easing bias for now, with the weaker dollar likely to prevail," said Emmanuel Ng, an FX strategist with OCBC Bank in a note.
"However, with the fundamental picture of trade tensions and economic slowdown still unchanged, we may not want to chase USD-Asia lower on a multi-session horizon." The Thai baht, which resumed trading after a market holiday on Monday, rose 1% and led regional gainers on the day. The Indian rupee tacked on 0.1 percent, helped by strong inflows into the stock and bond markets thanks to expectations of an interest rate cut by the Reserve Bank of India (RBI) on Thursday.
India's exchange data showed foreigners bought $142.4 million worth of equities and $275.1 million of bonds on Monday. "The RBI is expected to deliver a 25 bp rate cut on Thursday afternoon, with the aim of stimulating India's economic growth," said Scotiabank's Gao. Gao said a rate cut will boost Indian equities and bonds, and expectations of more market oriented reforms by Indian Prime Minister Narendra Modi's second term meant more upside for the rupee.
The Malaysian ringgit and Taiwan dollar also edged higher on the day. On the other hand, the South Korean won dropped after data showed the economy grew a revised 1.7 percent during the first quarter, slower than a 1.8 percent rise estimated earlier. China's yuan edged lower on Tuesday, but the Chinese central bank's firm fixing helped curb the fall.