Most Asian currencies strengthened on Monday, with the Indian rupee leading gains, while investors were cautious after China’s modest growth target, as well as concerns that Federal Reserve Chair Jerome Powell’s testimony will hint at bigger rate hikes.
The Malaysian ringgit and rupee appreciated 0.25% each, while the Philippine peso and China’s yuan weakened 0.1% each.
The Indonesian rupiah and Singapore dollar were trading largely flat.
China, Southeast Asia’s top trading partner, set a modest economic growth target of around 5% for 2023. It was at the low end of expectations, as policy sources had recently told Reuters that a range as high as 6% could be set.
The underwhelming target came despite statements from officials suggesting that the world’s second-biggest economy is “steadily improving” thanks to the relaxation of COVID-19 control measures and policies to revive the country’s dwindling property sector.
Market analysts at UOB said the lower growth target implied there was less pressure on the officials to expand monetary and fiscal support this year.
“But, with China moving to COVID-19 endemicity and fewer resources to be spent on testing and virus containment, we believe the effectiveness of its fiscal and monetary policy will be improved despite not announcing a more expansionary policy,” the analysts said.
Separately, a slew of indicative economic data in the US has rekindled market fears that the Fed will strike a hawkish stance and make further aggressive interest rate hikes, with eyes on the February jobs report due on Friday.
Investors also keenly await Powell’s testimony to Congress on Tuesday and Wednesday for an update on the central bank’s policy outlook and future actions.
Asian currencies decline on Fed rate hike jitters
The dollar index, which measures the US currency against six major peers, was down 0.057% at 104.560.
Most stock markets in the region tracked Wall Street higher, with equities in Manila climbing 0.7%.
Stocks in Kuala Lumpur advanced 0.1% and Mumbai rose 0.9%.
In South Korea, consumer inflation for February hit its slowest pace in 10 months, bolstering views that the central bank is done with its current policy tightening cycle after it held rates steady last month.
The South Korean won appreciated 0.4%, while shares in Seoul added 1.03% and led gains across the region.
Highlights:
** Indonesian 10-year benchmark yields fall 1.1 basis points to 6.971%
** Markets in Thailand were closed for a public holiday.
** Indonesia’s inflation to stay above 5% in first half -central bank chief
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