Philippine peso, rupiah lead losses as China data hits mood

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Asian currencies slipped on Monday, with the Philippine

peso and Indonesian rupiah leading losses as disappointing activity data in

China clouded the outlook, while the yuan fell after the central bank cut two

key interest rates.

The peso started the week on a negative note, weakening 0.3% after

firming 1.5% the prior week as expectations of a rate hike on Aug. 18 supported

the currency that has lost more than 8% in the first seven months of the year.

The Bangko Sentral ng Pilipinas (BSP) is widely expected to continue with

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its monetary tightening after an outsized 75 basis point (bps) hike in mid-July,

although a similar big move is not expected later this week.

Analysts at ING, DBS and OCBC expect a 50 bp hike to its key overnight

borrowing rate to contain inflation, hovering near four-year highs.

“Yet-to-peak and still rising headline inflation … is likely to keep

policymakers resolute in their fight to tame increasing price pressures and

ensure inflation expectations are not unanchored,” DBS analysts said in a note.

In China, a spate of bearish economic data – factory and retail activity –

underscored the surprise decision by the People’s Bank of China (PBOC) to cut

its interest rates on key lending facilities for the second time this year to

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prop up the economy.

That pressured the yuan, which slipped 0.3% to 6.7589 per dollar,

and further raises risks of a downtrend on rising capital outflows as a rate

divergence between the PBOC and other major central banks widens.

“The latest activity report underscores anemic domestic demand and

justifies the unexpected medium-term lending facility (MLF) rate cut,” analysts

at Maybank said.

“But lower interest rates may only provide some relief in the face of drags

from COVID-zero policies, property market malaise and potential slowdown in

global growth,” they added, describing yuan sentiment as a “tad cautious” in the

interim.

In Indonesia, the rupiah was down 0.4%, after strong gains in the

prior two sessions. The currency has firmed more than 1% in August so far on the

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back of a nascent economic recovery. It lost 4% in the first seven months of the

year.

Bank Indonesia (BI), one of the few laggards in the region that has yet to

begin monetary tightening, is set to meet next week against the backdrop of

strong second-quarter growth and soaring inflation.

Elsewhere, the Thai baht eased 0.3% following weaker-than-forecast

second quarter GDP data. The economy grew at its fastest pace in a year in the

April-June quarter on eased COVID-19 restrictions but inflation and China’s

slowdown remain a drag on its nascent recovery.

Among regional stocks, shares in the Philippines and Thailand

advanced 0.3% each, while those in Singapore, Indonesia, and

Malaysia remained largely unchanged.

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Markets in India and South Korea were on a holiday.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields rise 8.4 basis points to 7.055%

** China July industrial output up 3.8%, missing Reuters poll of 4.6%

** Japan April-June GDP expands annualized 2.2%, misses forecast

Asia stock

indexes and

currencies

at 0400 GMT

COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY % YTD %

Japan +0.23 -13.58 1.2 0.3

China -0.23 -5.97 -0.06 -10.03

India – -6.69 – 1.98

Indonesia -0.44 -3.26 0.00 8.32

Malaysia -0.17 -6.43 0.15 -1.90

Philippines -0.31 -8.68 0.31 -5.65

S.Korea – -8.74 – -15.10

Singapore -0.07 -1.68 -0.20 4.46

Taiwan -0.06 -7.71 0.71 -15.48

Thailand -0.32 -5.89 0.20 -1.93

(Reporting by Sameer Manekar in Bengaluru; Editing by Jacqueline Wong)