Asian currencies traded narrowly on Wednesday, with the Thai baht and Indian rupee firming as investors looked to data that could raise prospects of an early cut in US interest rates. Economic indicators in the United States have been a point of focus for emerging markets, given that sustained weakness in the economy could prompt immediate action from the Federal Reserve and drive money to regional currencies.
Sino-US trade tensions, meanwhile, kept markets cautious as US President Donald Trump hardened his stance on trade talks with China. Trump said on Tuesday he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees again to four or five "major points", be he did not specify.
"Expect investors to remain antsy with US Commerce Secretary expecting no major breakthrough deals, while official rhetoric from China continues to harden," OCBC's Emmanuel Ng said in a note.
The Thai baht led gains for the day, rising about 0.15% to the dollar. The currency has outperformed its peers this year, gaining about 4.2% so far. While Thailand's strong economic fundamentals, such as a robust current account surplus, have bolstered the baht, headwinds from global trade are expected to weigh. This has already become apparent with a steady decline in its surplus this year.
The Indian rupee rose about 0.06% to the dollar. The currency has benefited from a recent drop in oil prices, as India imports a vast majority of its crude requirements.
Retail inflation in the country is expected to have accelerated in May, according to a Reuters poll, but will likely remain below the Reserve Bank of India's target, providing it with more room to ease policy after shifting to an accommodative stance last week. The official reading is expected later in the day. Indian industrial output data for April is also due later in the day. Elsewhere, the Chinese yuan edged about 0.07% lower against the dollar. It gained on Tuesday following the central bank's plans to issue bills in Hong Kong later in June that analysts believed were aimed at preventing the currency from declining further. The Philippine peso saw limited trade with markets closed for a public holiday.
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