Asian FX, stocks fall as investors await more China stimulus

Indonesia’s rupiah and Malaysia’s ringgit led losses in major Asian currencies against a broadly strong dollar on Tuesday, while equities declined as China’s first benchmark rate cut in 10 months failed to impress investors hoping for a stronger stimulus.

China lowered its one-year and five-year loan prime rates (LPR) by 10 basis points, as widely expected, as authorities seek to shore up a slowing recovery in the world’s second-largest economy.

“Markets were expecting a larger rate cut from China,” said Christopher Wong, currency strategist at OCBC.

Wong said major Asian currencies were trading lower against a strengthening dollar as markets sought clarification from mixed Federal Reserve messaging and data plots last week ahead testimony by its chair, Jerome Powell.

The rupiah and ringgit, which were seen tracking the Chinese yuan, were down 0.3% and 0.2% respectively.

The US dollar index, which measures it against a basket of currencies, rose broadly to trade at 102.51, up 0.03%.

China’s yuan depreciated 0.2%, with stocks in Shanghai down 0.2%.

“Markets were awaiting a follow through in economic stimulus but are looking at the rate cuts as (offering) little support on the property sector side,” Wong said of the Chinese sector.

Trade data showed exports in Malaysia fell much slower-than-anticipated in May, contracting marginally, with imports declining 3.3%, slower than a Reuters expectation of 12.1%.

Equities in Kuala Lumpur were marginally down.

Meanwhile, the central banks of Indonesia and Philippines are set to meet on Thursday.

Bank Indonesia (BI) is likely to keep its key interest rate unchanged at 5.75% for a fifth consecutive meeting, and for the rest of the year, as inflation eased in May and was expected to decline further, a Reuters poll of economists found.

The Philippine central bank was also expected to leave its key interest rate unchanged at 6.25% for a second straight meeting and the remainder of the year as price pressures ease, a Reuters poll found.

The South Korean won and Japanese yen appreciated 0.1% and 0.2%, respectively, against the dollar with the latter’s finance minister saying there would no change to its foreign exchange policy.

Equities in Thailand and the Philippines dropping 0.9% and 0.5%, respectively.