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Thai baht led the advance in Asian emerging currencies on Tuesday as the US dollar was subdued ahead of Federal Reserve’s policy meeting minutes, while surging COVID-19 infections in China capped gains.

The baht rose for the third session in row, up 0.6%, as the tourism-reliant country banks on hopes of China’s reopening after the world’s second-largest economy dismantled its strict COVID regime in December.

The dollar index was flat in a subdued start to 2023, following a recent weakening in the currency as markets bet that a Federal Reserve tightening cycle may be nearing an end.

The index rose 8% last year in its biggest annual jump since 2015, as investors flocked to the safe-haven unit owing to the Fed’s rate hikes and dumped riskier assets, hitting regional currencies.

China’s yuan hit to a more than four-month high, gaining 0.2%, underpinned by hopes of an earlier-than-expected economic recovery even as factory activity shrank in December.

In coming days, traders will closely watch the pace of reopening in China, which Bank of America analysts predict “may indicate a deeper and more disruptive shock in the near term, before a robust rebound”.

Investors also await a slew of economic data during the week from several countries, along with the minutes of the Federal Reserve’s December policy meeting, which may offer clues to the Fed’s likely rate hike path in 2023.

Singapore’s dollar rose 0.2% after data showed the city-state’s economy grew faster than official forecasts in 2022, but fourth-quarter activity slowed, reflecting risks from inflation and global demand weakness, sending its stocks down 0.2%.

Asian currencies, stocks underpinned by China’s quarantine ease

Analysts at lender OCBC see Singapore’s growth momentum moderating in 2023 as its manufacturing sector remains lacklustre in the near-term.

Indonesia’s rupiah slipped 0.2% after its December inflation print showed a slight jump on Monday.

The Japanese yen scaled a seven-month high against the greenback during the session and was up 0.7%, amid speculation that the Bank of Japan might move away from its ultra-easy policy.

Most regional equity markets rose in choppy trade, with Jakarta stocks leading, up 0.7%. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat after edging up 0.5% earlier.

Shares of Garuda Indonesia slumped as much as 14.4% on Tuesday, the state carrier’s first trading day in 1-1/2 years after the Jakarta stock exchange lifted a stock trading suspension.

Bucking the broader trend, Malaysian stocks dropped 1.1%, snapping a six-day winning streak, while South Korea stocks fell 0.3%.

Highlights:

** South Korea’s central bank governor said the bank will do its best to ensure a soft landing for the economy amid significant internal and external uncertainty

** The Bank of Singapore on Tuesday appointed Jason Moo, formerly of wealth manager Julius Baer, as its new chief executive effective March 6

** The Indian rupee was little changed against the US currency on Tuesday, as markets awaited a host of data from the world’s top economy to find direction this week

** Malaysian palm oil futures ticked up on Tuesday, underpinned by expectations of slowing production and tighter Indonesian supply

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