Most Asian currencies strengthened on Tuesday, as the dollar pulled back from the five-month high it touched the day before, as some investors took profit after recent gains. In the month ended on Monday, the greenback surged 5.4 percent against a basket of major currencies, supported by rising US bond yields and a defusing of US-China trade tensions.
Overnight, the benchmark US 10-year Treasury yields stepped back from seven-year highs set last week, but remained above the 3 percent mark, while the dollar index edged lower. "A modest decline in US Treasury 10-year yields towards 3.05 percent, on top of the decline in US-China trade tensions, has contributed to some relief for Asian currencies," Mizuho bank said in a note.
Malaysia's ringgit inched higher ahead of April inflation data on Wednesday, a Reuters poll showed the annual rate is expected to have accelerated slightly from March. Stephen Innes, head of trading for Asia-Pacific at Oanda said in a note the ringgit remains vulnerable to the uncertainty over the new government's fiscal position given that it is halting the country's goods and services tax (GST).
Nonetheless, markets levels "look attractive from both a bond yield and currency perspective not to mention surging oil prices... once fiscal clarity is offered, we could finally see the ringgit sentiment improve," he said. A day before Singapore's inflation data for April is released, its currency was slightly lower at 1.341 to the dollar. A Reuters poll said the annual inflation rate last month increased from the previous month.
The Thai baht strengthened 0.2 percent against the dollar to 32.14. Encouraging economic data has helped shore up the baht as one the best performing currencies among peers. Data showed customs-cleared exports grew at a faster pace in April than the previous month, slightly above estimates, while gross domestic product data out on Monday showed the economy grew at its fastest in five years in the first quarter.
Taiwan's dollar climbed 0.2 percent against the dollar, after data on Monday showed export order growth in April beat forecasts. South Korean markets were closed for a public holiday. On Wednesday, the central bank has a policy meeting. The rupiah marginally strengthened, but it remained close to more than two-and-a-half year lows.
On May 15, Southeast Asia's largest economy reported a trade deficit for April that was the biggest for any month in four years, which ING said was main source of concern for the rupiah. On May 17, the central bank raised its benchmark rate for the first time since 2014 in a bid to shore up the rupiah. "No amount of intervention will change that and rate hikes will only work if they rise sufficiently far to slow other parts of the economy and pull trade back into balance," ING said.