Emerging Asian currencies were stuck in tight ranges on Monday, as the greenback received a boost from rising investor expectations of interest rates remaining higher for longer on the back of strong US economic data.
The Taiwanese dollar advanced 0.3%, paring back some gains made earlier in the session. It was on course for its biggest intraday gain in 13 weeks.
The South Korean won, seen by analysts as a “high-beta” currency, dropped 0.2%.
The Chinese yuan rose 0.3% to 7.2 per US dollar at 0624 GMT, after major state-owned banks sold dollars for yuan to stabilise the Chinese currency. It had weakened to a four-month low on Friday, breaching the psychologically important 7.2-per-dollar level.
The yuan intervention “pushed back speculation that policymakers may allow another round of RMB depreciation,” OCBC currency strategist Christopher Wong said.
Asian shares were mixed due to the absence of strong catalysts and as investors were wary that a key US inflation gauge - core personal consumption expenditure (PCE) price index - due on Friday could derail the outlook for lower US rates.
The PCE index was seen rising 0.3% last month.
A stronger outcome would be taken as a setback to hopes for a Federal Reserve rate cut in June.
“Stronger US data and hawkish Fed speaks may keep USD broadly supported. At this point, USD still presents a relative yield advantage and the Fed has communicated that they are in no hurry to cut rates,” Wong said, referring to the dollar’s recent strength.
The US dollar index, which measures the greenback against a basket of major currencies, was last steady at 104.34, having clocked a weekly gain of nearly 1% last week.
“This would probably change only when US data starts to show more signs of softening and this puts focus on core PCE this Friday,” Wong added.
Stocks in Seoul and Manila weakened 0.5% each. Shanghai’s shares index surged 0.6%, while those in Taipei and Bangkok were marginally up by 0.2% and 0.1%, respectively.
In Malaysia, government data showed consumer price index (CPI) in February rose 1.8% from a year earlier.
The ringgit was last up 0.2%, while stocks traded 0.4% lower.
In Vietnam, the dong appreciated 0.1% to 24,797.0 per dollar, recovering some last ground over the past few sessions as political uncertainty roiled investors.
Markets in India were closed for a public holiday.
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