Thailand’s baht pared gains on Monday after a lower-than-expected rise in inflation, while other Asian currencies traded cautiously ahead of US and China inflation data due later in the week.
The baht was up 0.27% earlier but pared gains to nearly 0.1%, while equities in Bangkok fell 0.2%, as the headline consumer price index came in below the central bank’s target of 1% to 3% for a third successive month.
The inflation data comes against the backdrop of growing political uncertainty in Southeast Asia’s second-largest economy since the May 14 election, with the country’s former prime minister Thaksin Shinawatra postponing his return from self-exile as the region struggles to overcome a political deadlock.
“Thai inflation in July dampens hawkish hopes that the Bank Of Thailand (BOT) may give one more encore hike this year,” said Kittika Boonsrang, a capital markets business research specialist at Kasikornbank.
“At the same time, it may cause some weakness in the Thai baht via speculative flows as the BOT seems to reach its peak rate in this cycle.”
Meanwhile, economic growth in Indonesia in the second quarter accelerated unexpectedly and came in above market predictions.
Thai baht falls on political uncertainties, Asian FX declines
The Indonesian rupiah was slightly weaker before the data, while stocks were up 0.4%.
Among other currencies in the region, the Malaysian ringgit and Philippine peso appreciating 0.02% each, while the Singapore dollar depreciated slightly.
Investors are eyeing US and Chinese inflation figures due later this week, with hopes of more policy easing to aid a weak post-pandemic recovery in China.
The Chinese yuan weakened 0.3% and is among the worst performing currencies in the region this year.
“Markets continue to wait for more stimulus measures to be announced by the Chinese authorities … There is huge expectations of more policy support to be announced. Any lacking in that regard, I think, could risk some pullback in risk sentiment in the region,” said Khoon Goh, head of Asia research at ANZ.
Meanwhile, Taiwan’s benchmark share index was up 0.9% while stocks in Manila were 0.8% higher.
Stocks in South Korea and China fell 0.5% and 0.6%, respectively.
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