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
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
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
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
back of a nascent economic recovery. It lost 4% in the first seven months of the
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.
Markets in India and South Korea were on a holiday.
** 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
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)