Asian FX gains on as risk appetite improves; yuan drops

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Most emerging Asian currencies traded

higher on Wednesday, as risk appetite improved on hopes that the

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U.S. Federal Reserve would pare back on rate hikes, although

China was an outlier after downbeat data and rising COVID-19

cases.

Investors are hoping that U.S. inflation data on Thursday,

which is expected to show a decline both on a monthly and annual

basis, boosts the case for the Fed to slow its tightening cycle.

The central bank raised rates last week but signaled it may

be nearing an inflection point in what has become the swiftest

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tightening of U.S. monetary policy in 40 years.

“As the ‘peak Fed’ theme draws closer and terminal rates

converge around 5.0%, the USD higher momentum has taken a pause

(which is) good news for Asia FX and likely provides a cushion

for local risk markets,” said Stephen Innes, managing partner at

SPI Asset Management.

Meanwhile, the Chinese yuan remained the only

laggard for the day, dropping 0.2%, while stocks shed

0.5% as factory gate prices went backwards and consumer

inflation slowed, highlighting concerns over demand and economic

outlook.

The world’s second-largest economy also saw a surge in new

coronavirus cases in Guangzhou, a global manufacturing hub, and

other Chinese cities, further dampening hopes of any ease in

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curbs and restrictions.

“The weak CPI print and 1.5-year low for core inflation

points to weaker consumption in October amid intensified COVID

lockdowns,” said Barclays analysts, lowering their 2022

inflation forecast to 2.0%.

In Asia, the South Korean won strengthened 1.5%

to lead the gainers. Indonesia’s rupiah rose for the

third straight day and the Philippine peso edged 0.1%

higher.

Stocks in Manila, however, dropped 0.6% after rising

0.4% earlier in the day. The Philippines revised upwards its

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

due on Thursday.

In Malaysia, the ringgit firmed 0.5% and stocks

rose modestly. A Reuters poll showed the economy was

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

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

The ringgit has fallen almost 12% against the U.S. dollar so

far this year. It 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.

HIGHLIGHTS:

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

widen

** Palm drops for the second day on higher Malaysian stocks,

tepid China demand

** Taiwan aims for British trade deal as minister meets

president

Asia stock indexes and

currencies at 0659 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.03 -21.0 <.n2>

China 6 EC>

India +0.53 -8.78 <.ns ei>

Indonesi +0.27 -8.96 <.jk a se>

Malaysia +0.51 -11.5 <.kl se>

Philippi +0.10 -12.1 <.ps nes i>

S.Korea 1 11>

Singapor -0.07 -3.59 <.st e i>

Taiwan +0.63 -13.1 <.tw ii>

Thailand +0.24 -9.38 <.se ti>

(Reporting by Jaskiran Singh and Navya Mittal in Bengaluru;

Editing by Ana Nicolaci da Costa and Savio D’Souza)