Most Asian currencies edged up on Wednesday, with the Philippine peso and South Korean won leading the pack, as the US dollar dipped in early Asian trading with investors paring back their expectations of a Fed rate hike next week.
Equities in the region were also largely buoyed by hopes of more stimulus from China and easing Sino-US tensions as US Secretary of State Antony Blinken plans to travel to the Asian country in the coming weeks.
Analysts at Maybank predict better bids for the Chinese yuan if there is a de-escalation in tensions between the world’s two biggest economies, but stayed away from forecasting the effect on the currency from China asking its banks to lower their deposit rates.
China’s yuan reversed course from earlier in the session to weaken marginally against the dollar after data showed exports and imports fell in May.
The Philippine peso appreciated up to 0.3% as the country’s central bank remained vigilant on any threats to getting inflation back to its target range of 2% to 4%, keeping doors open to resume further monetary policy tightening if needed.
Data released on Tuesday showed annual inflation had slowed for a fourth consecutive month in May, rising 6.1% from a year earlier.
Elsewhere, South Korean won appreciated as much as 0.9% to touch its highest level since April 14, trading after a market holiday on Tuesday.
Shares in Seoul were up 0.3%, rising for a third straight session.
The US dollar index slipped marginally in early Asia trade to 104.110 as markets priced in a roughly 19% chance that the US Federal Reserve would raise rates by a quarter-point next week, according to the CME FedWatch tool.
Asian currencies tepid as Fed’s rate-hike talk boosts dollar
Meanwhile, the Indonesian rupiah was the only other currency weakening against the US dollar, losing 0.2%.
Among equities, benchmarks in Manila, Bangkok and Taipei gained between 0.3% and 0.5%, while those in Jakarta, Kuala Lumpur and Singapore slipped up to half a percentage point.
Elsewhere in emerging markets, Turkish lira depreciated nearly 3% to a record low level of 22.15 per dollar as investors expect heavy state control over the currency to end with the appointment of Mehmet Simsek as finance minister.
Meanwhile, investors in India will be awaiting the country’s central bank’s interest rate decision.
A Reuters poll of 64 economists showed the Reserve Bank of India will keep the key rate unchanged at 6.5% on Thursday and for the rest of the year.