The Philippine peso and South Korean won depreciated more than half a percent each on Monday, leading losses among weak Asian units across the board as the US dollar remains supported by an aggressive Federal Reserve.
The investor calendar this week is packed with central bank meetings - Singapore, South Korea, New Zealand, and the European Central Bank - and inflation data, including that from the United States, which will provide cues on policy tightening.
Also on the radar would be any potential policy action by the People’s Bank of China as the world’s second-largest economy faces a double whammy from renewed COVID-19 outbreaks and a slowdown in manufacturing and services activity.
Data released earlier in the day showed China’s factory inflation slowed but beat expectations in March. Most analysts expect China’s central bank to lower borrowing costs and cut reserve requirements for banks to pump more cash into the economy.
“There is room for an outsized rollover of MLF (medium-term lending facility rate) given the small maturing amount of 150 billion yuan ($23.55 billion),” analysts at OCBC Bank said.
“A more dovish approach will be an RRR (reserve requirement ratio) cut to (more than) replace the MLF, while some market participants are expecting a 5-10 basis points cut in the MLF rate.”
Both the Philippine peso and the South Korean won weakened up to 0.7% each, with the peso logging its worst day this month so far, and the won falling to its lowest in nearly a month, pressured by strength in the US dollar, which hovered close to its near two-year high of 100 against a basket of major global currencies.
The peso, which was earlier supported by proceeds from a recent dollar bond issuance, faced pressure as the trade gap widens, with a jump in fuel imports amid rising global commodity prices, Nicholas Mapa, senior economist at Dutch-bank ING said.
The Thai baht, Taiwan dollar, Malaysian ringgit and Singapore dollar slipped between 0.2% and 0.4%. The Taiwan dollar slumped to its lowest since October 2020 and was on track for its sixth consecutive day of declines.
The Monetary Authority of Singapore is widely expected to tighten foreign exchange policy later in the week on rising inflationary headwinds to economic growth.
Equities were largely in the red on pressures from an aggressive Fed, the slowdown in China, as well as domestic headwinds from rising inflation concerns. Benchmarks in Singapore and Taiwan declined over 1% each.
Indonesian shares were the sole gainer on the board, jumping as much as 2% on the back of resources stocks as a potential European Union embargo on Russian coal exports sparked a rally in Indonesian coal exporters.
Top coal producers Bumi Resources and Adaro Energy were among the top boosts to the benchmark, advancing as much as 1.6% each.
The country’s largest tech firm, GoTo soared as much as 23% in its market debut.
** Indonesian 10-year benchmark yields up 4.5 basis points to 6.834%, highest in a month
** Food prices likely pushed India inflation to 16-mth high in March - Reuters poll
** China 10-year treasury bond yield falls below US counterpart