Philippine peso led gains as Asian currencies edged higher on Wednesday, despite China’s consumer prices falling in July, making it the first G20 economy to enter deflation territory since Japan in 2021.
The Chinese yuan strengthened 0.2% as major state-owned banks were seen selling dollars to slow the pace of the yuan’s decline, while stocks slipped 0.4%.
The weak inflation data from China fuelled concern over the outlook for global growth, and should add to pressure on authorities in Beijing to do more to stimulate demand in the world’s second-largest economy.
Analysts at Goldman Sachs expect deflation in producer prices to persist in coming months, while also expecting a “U-shaped recovery” for consumer prices.
“A gradually closing output gap is likely to bring headline CPI inflation back to its 2% long-term historical trend by the end of 2024,” they said in a note.
The Philippine peso gained 0.2%, while Indonesia’s rupiah and Malaysia’s ringgit appreciated slightly.
Stocks in the region traded higher, with South Korea and Malaysia leading the gains, as their benchmarks rose over 1% and 0.4% respectively.
Shares in Manila edged slightly higher.
The country’s agricultural and fisheries production by value narrowed 1.3% in the second quarter ahead of Thursday’s economic report.
In Thailand, the central bank chief said economic growth forecasts may need to be revised down, as the recovery may not be as strong as expected earlier, and interest rates may be raised or held steady at the next policy review.
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Shares in Manila edged slightly higher.
The country’s agricultural and fisheries production by value shrank 1.3% in the second quarter from a year earlier.
The Philippines releases second quarter gross domestic product data on Thursday.
The US dollar index, which measures the greenback against six major peers, edged lower by 0.068 to 102.45 as of 0346 GMT.
Concerns about US banks added to the risk-averse sentiment, after Moody’s cut credit ratings of several small to mid-sized US banks and said it may downgrade some of the nation’s biggest lenders, including Bank of New York Mellon and US Bancorp.
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