Emerging markets: Bank Indonesia’s policy meeting on Tuesday awaited as Asian FX edges higher as dollar weakens

JAKARTA, May 23 (Reuters): Asian currencies overcame early market pressure to edge higher against a tepid US dollar on Monday, while the Singaporean dollar rose to a 2-1/2-week high after data showed the city-state witnessed its fastest rise in core inflation in a decade.

South Korea’s won and the Taiwanese dollar rose 0.3% and 0.1%, respectively, while the Thai baht and Philippine peso traded flat.

The dollar weakened against major currencies, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising US rates, while hoping that loosening lockdowns in China can help global growth.

“Chatter of US. recession risks and hence less pressure for the US Federal Reserve to tighten aggressively (have seen) rate hike bets and USD longs unwind,” said Christopher Wong, senior FX strategist at Maybank.

Relative stabilisation of the yuan, pullback in US Treasury yields, China’s unexpectedly large borrowing rate cut for mortgages on Friday and signs of Shanghai reopening have aided sentiment in Asia, Wong said.

The yuan, which last week recorded its biggest weekly jump since October 2020, hit its highest since May 5 on Monday. Risk sentiment got a lift after US President Joe Biden said Washington may cut tariffs on imports from China.

Singapore’s core inflation rate – the central bank’s favoured price measure – rose to 3.3% in April on a year-on-year basis, the highest since February 2012, driven by higher food prices.

A Reuters poll of economists had forecast a 3.4% increase.

“Price pressures are expected to remain elevated in the near term, although pressure on the Monetary Authority of Singapore to resort to additional tightening may have abated somewhat as actual inflation slipped below market consensus,” analysts at ING said in a note.

The Singaporean dollar appreciated 0.4%. Stocks in the region, however, struggled for direction.

Equities in Bangkok and Taipei were up 0.5% each, while those in Manila and Singapore traded in red.

Stocks in Jakarta dropped more than 1% and were set to snap a four-day winning streak ahead of Bank Indonesia’s policy meeting on Tuesday.

Economists in a Reuters poll predicted the Indonesian central bank will wait a few more months to raise rates from a record low despite rapid inflation and aggressive tightening by the US Fed.

Separately, Indonesia is due to resume exports of palm oil later in the day after a ban of more than three weeks, but industry traders and companies were awaiting details on accompanying rules to secure domestic supplies of the edible oil to control cooking oil prices. – Reuters