Asian stocks, currencies nudge higher as Fed rate hike threat eases

Most Asian stocks edged up on Monday, showing signs of easing volatility after US jobs data hinted the recovery in the world's biggest economy was on track but didn't yet need an immediate withdrawal of Federal Reserve stimulus.

The Fed's surprising hawkish tilt last month spooked Asian markets with the prospect that the central bank's unwinding of bond-buying programme and sooner-than-expected rate hikes could lead to outflows from emerging markets.

Taiwan's bourse rose 1% while South Korea, the Philippines and Singapore's equities made modest gains of around 0.4% each.

The greenback pulled back from three-month highs as rate hikes bets ebbed, pressured by the weaker aspects of the US nonfarm payrolls report where the unemployment rate for June rose, even as the number of jobs added beat forecast.

Local currencies firmed in response, with the Indonesian rupiah, South Korean won and Taiwan's dollar firming 0.3% to 0.6%.

"Overall, market sentiment starts this week on a more positive footing," OCBC analysts said in a note, adding that a more consistent outperformance on the labour front would be needed to price in for Fed expectations.

"That may come through only towards the end of third-quarter of 2021."

Trading was thin as US markets remain closed for the extended 4th of July weekend. Investors now await the minutes of Federal Open Markets Committee June meeting on Wednesday for more clues on tapering.

Pandemic-hit Indonesia's stocks dropped 0.5% after posting its biggest daily jump in deaths from coronavirus, fuelling doubts about the timeline of lifting of curbs in the country.

The Thai baht, which has shed almost 4% over the past three-weeks, traded little changed.

JP Morgan analysts said they expected no big bets would be made until there was more clarity on the success of the country's "Phuket sandbox" initiative that allows free movement on the island for fully vaccinated tourists.