Many Asian currencies advanced on Tuesday, as recessionary fears were eased in part by positive economic data from the United States, but its effect on bond yields left equities pressured.
The Singapore dollar, Thai baht and South Korean won all saw modest gains of about 0.1% each.
Orders for capital goods in the US grew in May, hinting that business spending had remained resilient amid fears of a slowdown.
Additionally, contracts to buy previously owned homes in the US also recorded a surprise rise in May, data showed, after six months of declines, despite higher borrowing costs.
“Overall, markets are paying more attention to the resilience of US consumer demand and private investment that the Fed relies on to expedite rate hikes to neutral,” analysts at DBS said in a note.
Recent weakness in the mood for the dollar may also be an influence, said Bank of Singapore FX strategist Moh Siong Sim.
The dollar index is on its third consecutive session of losses.
“The market was nervous at the earlier part of last week, but risk markets started to stabilise, and that I think led to a bit of a dollar pullback, and this is why you’re starting to see a bit of an Asian currency strength”, he said.
However, the positive US data prompted bond yields to inch higher, weighing on equity markets on Wall Street and subsequently in Asia.
Yields in Singapore also tracked higher, with the yield on the 10-year bond ticking up 2.9 basis points to 3.031%.
Stocks in Asia saw choppy trade but remained broadly lower, with Indonesian stocks down 0.5% and Singaporean markets down 0.3%.
Asia FX bears hit record high on hawkish Fed, China growth worries
Ratings agency S&P late on Monday revised its outlook for Malaysia to “stable” from “negative”, given its monetary policy flexibility and its record of supporting sustainable economic growth.
The ringgit rose 0.1%, while its bonds were unchanged, still yielding 4.241%.
The Philippine peso, after snapping an eight-session losing streak on Monday to close the session 0.2% higher, was back to losses on Tuesday.
Indonesia’s rupiah declined 0.3%, to be one of the worst performers in the region.
“Divergence in Fed-(Bank Indonesia) policy stances, as well as recent decline in (crude palm oil) prices weighing on trade balances, could be supportive of USDIDR near-term”, analysts at Maybank said.
Palm oil prices have been inching lower on expectations of higher production as well as recessionary fears.
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