Asian currencies tracked China’s yuan to edge higher on Tuesday, as speculation that Chinese authorities are seeking to slow the pace of yuan depreciation boosted risk sentiment and prompted investors to shift focus from global growth concerns.
The Philippine peso, the South Korean won and the Malaysian ringgit appreciated between 0.2% and 0.6%.
“Despite the negative sentiment from US equities overnight, in terms of FX markets it is actually the yuan recovery that is driving Asian currencies today,” said Khoon Goh, head of Asia research at ANZ.
The spot yuan appreciated 0.4% after the People’s Bank of China (PBOC) set the daily yuan fixing rate stronger than market expectations for a second day.
The stronger fixing coincided with selling of dollars in the offshore spot market by China’s major state-owned banks, according to sources, suggesting authorities wanted to slow the pace of the yuan’s recent slide.
The yuan has been weighed down by China’s faltering economic growth and markets have been expecting a basket of supportive measures from Beijing before they make stronger bets on a recovery.
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“The yuan is the anchor currency for the region, so the run of weakening yuan since May had put a lot of pressure on other regional currencies. The fact that we finally saw Chinese authorities sending a signal that they’re seeking to slow down the pace of the yuan’s depreciation has helped turn things around a little bit,” Goh added.
Meanwhile, Singapore’s dollar firmed 0.2%. It fell 0.1% on Monday after data showed that the city-state’s industrial output in May fell 10.8% year-on-year, the eighth consecutive contraction and below forecast.
“Being highly sensitive to external demand, a low-for-longer growth outlook for Singapore seems to be the takeaway, with a dimmer economic outlook and a global tech downcycle at play,” IG market analyst Yeap Jun Rong wrote.
Stocks in the region were mixed, as Wall Street lost ground overnight as investors digested the aborted Russian mutiny over the weekend and wrestled with lingering concerns over the path of Federal Reserve monetary policy.
Stocks in Manila and Bangkok rose 0.1% and 0.2%, respectively, while equities in Seoul and Taiwan lost 0.2% and 0.8%, respectively.
Geopolitical turmoil has dampened risk appetite following the aborted mutiny in Russia over the weekend.
President Vladimir Putin paid tribute to pilots killed, confirming for the first time that Russian aviators had been lost in battle as the Wagner mercenary group marched on Moscow.
The rouble was last down 0.5% after sinking to its lowest in nearly 15 months.
Turkey’s lira touched a record low against the dollar, after an official and bankers said the central bank had stopped using its reserves to support it.
The lira weakened as much as 1% to 26.172 per US dollar.
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