EMERGING MARKETS-Asian FX struggles on economic woes, rupiah at two-year low


By Harshita Swaminathan

July 1 (Reuters)Most Asian currencies began the new quarter on a negative note after US data showed higher prices hurting consumer spending, fueling fears of an economic slowdown, while the Indonesian rupiah hit a more than two-year low.

The Thai baht THB=TH took the largest hit, losing 0.7% while India’s rupee INR=IN gave up 0.2% to hit a record low for the third time this week, trading as low as 79.105 to the dollar.

US consumer spending, which accounts for more than two-thirds of the country’s economic activity, rose less than expected in May, as higher prices led households to cut back. Inflation-adjusted consumer spending even showed a contraction.

Uncertainty over the economic outlook drove safe-haven flows to the greenback, lifting the dollar index .DXY by about 0.3% and further pressuring emerging Asian currencies.

“In general, the growing concerns over US and global growth is keeping pressure on Asian currencies,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

The Philippine peso PHP= and Singapore dollar also gave up 0.4% and 0.2%, respectively.

The Indonesian rupiah IDR= slid 0.5%, hitting its lowest since May 2020 and trading at 14,970 to the dollar. The moves followed an inflation reading that showed core inflation coming in below market expectations, even as the headline figure breached the central bank’s target range.

Indonesia’s central bank governor said lower core inflation means it has some flexibility to not hike rates in a rush.

Analysts at Goldman Sachs expected the Bank Indonesia to begin hiking as early as July, and forecast 125 basis points of cumulative hikes over the rest of the year.

“Some recent softening in the commodity outlook on global growth concerns could be exacerbating market concerns over inflation in Indonesia,” analysts at Maybank said.

The South Korean won KRW=KFTC, however, gained 0.1% amid broader weakness. RBC’s Tan said the move was likely down to strength in the Japanese yen JPY=as the two countries export similar goods, their currencies tend to be correlated to some extent.

The weak US data also weighed on the country’s yields US10YT=RR and Asian yields mirrored the moves.

Singapore’s 10-year benchmark yield SG10YT=RR dropped 6.5 basis points to 2.898%, while Indonesia’s ID10YT=RR was down 1.9 basis points at 7.230%.

Across Asia, manufacturing activity slowed in June due to supply disruptions from China’s COVID-19 lockdowns, a series of surveys showed. China’s manufacturing activity, however, expanded at its fastest pace in 13 months.

Stock markets in Asia were mostly in the red, with indexes in India .NSEI losing 1% and those in Indonesia .JKSE down 0.9%. However, Philippine stocks .psi managed an 0.8% rise.

HIGHLIGHTS:

** New Philippines central bank governor Felipe Medalla takes office on Friday

** Taiwan’s PMI contracts, Taiwanese stocks .TWII lose 2.9%, currency TWD=TP down 0.2%

Asia stock indexes and currencies at 0213 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

+0.47

-14.82

.N225

-1.80

-9.98

China

CNY=CFXS

-0.08

-5.23

.SSEC

-0.18

-6.80

India

INR=IN

-0.12

-5.98

.NSEI

-1.05

-10.02

Indonesia

IDR=

-0.47

-4.78

.JKSE

-0.94

4.02

Malaysia

MYR=

-0.05

-5.54

.KLSE

0.46

-7.44

Philippines

PHP=

-0.43

-7.71

.psi

0.75

-12.93

S.Korea

KRW=KFTC

+0.08

-8.37

.KS11

-1.32

-22.70

Singapore

SGD=

-0.18

-3.11

.STI

-0.01

-0.70

Taiwan

TWD=TP

-0.23

-7.07

.TWII

-2.85

-20.94

Thailand

THB=TH

-0.66

-6.04

.SETI

0.04

-5.35

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

Asian stock markets https://tmsnrt.rs/2zpUAr4

(Reporting by Harshita Swaminathan; Editing by Sam Holmes)

((Harshita.Swaminathan@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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