Asia currencies rise as investors eye U.S. inflation, China caps gains

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Most emerging Asian currencies rose on

Wednesday as risk appetite improved on hopes that the U.S.

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Federal Reserve would pare back the scale of future interest

rate hikes, but downbeat data and rising COVID-19 cases in China

capped broader gains.

Investors were looking towards U.S. inflation data on

Thursday to see whether it would boost the case for a slowdown

in the Fed’s tightening cycle. Economists expect core inflation

to decline both on a monthly and annual basis.

The Fed said last week its battle against inflation

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will require borrowing costs to rise further but

signaled it may be nearing an inflection

point in what has become the swiftest tightening of U.S.

monetary policy in 40 years.

“The U.S. dollar continued to trade with a heavy bias as

markets indulged in (the) Fed calibration narrative,” said

Christopher Wong, a currency strategist at OCBC Bank.

Among Asia’s emerging market currencies, the South Korean

won and Thai baht benefited the most from this backdrop so far

this week.

“We reiterate that a more moderate USD profile should

create a conducive environment for stretched Asian FX to

rebound,” Wong said.

The South Korean won strengthened 1.6% to lead

gains, Indonesia’s rupiah rose for the third straight

day, and the Philippine peso edged 0.2% higher.

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Stocks in Manila clawed back from a 0.8% drop earlier

to trade about flat by 0410 GMT. The Philippines revised upwards

its second-quarter growth figures, ahead of a third-quarter

readout due on Thursday.

The Chinese yuan remained the only laggard,

weakening 0.2%, as factory gate prices in the world’s

second-largest economy dropped for the first time since December

2020.

“With China’s weak activity data, soft non-food price

inflation indicates an economy suffering from weak demand,” said

Stephen Innes, managing partner at SPI Asset Management.

“Unlike its Asian peers, China’s inflation leaves currency

authorities open to CNY weakness, albeit at a pace that does not

encourage outflows.”

In Malaysia, the ringgit firmed 0.4% and stocks

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rose modestly. A Reuters poll showed the economy was

poised to grow in the double digits for the first time in over a

year in the third quarter, even as the outlook remained hazy.

The ringgit, which has fallen almost 12% against the U.S.

dollar so far this year, hit a near 25-year low last week and

has hovered around that level since. Analysts suggest some

pressure may persist until after this month’s general election.

“Rising COVID cases in China, domestic elections uncertainty

etc could continue to weigh on the ringgit in (the) near-term.

Historically, elections-induced currency caution could persist

for 1-2 quarters until signs of credible policymaking emerges,”

analysts at Maybank said.

HIGHLIGHTS:

** China’s COVID epicenter shifts to Guangzhou as outbreaks

widen

** Taiwan October exports edge down but chip demand holds up

** Thailand scraps plan to allow foreigners to buy land

Asia stock indexes and

currencies at 0411 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan +0.06 -20.9 <.n2> ! !

China 2 EC>

India +0.47 -8.84 <.ns ei>

Indonesi +0.31 -8.92 <.jk a se>

Malaysia +0.42 -11.6 <.kl se>

Philippi +0.16 -12.1 <.ps nes i>

S.Korea 5 11>

Singapor -0.08 -3.60 <.st e i>

Taiwan +0.50 -13.2 <.tw ii>

Thailand +0.22 -9.40 <.se ti>

(Reporting by Jaskiran Singh and Navya Mittal in Bengaluru;

Editing by Ana Nicolaci da Costa)