Asian FX struggles on economic woes, rupiah at two-year low

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Most Asian currencies began the new quarter on a negative

note after U.S. data showed higher prices hurting consumer spending, fueling

fears of an economic slowdown, while the Indonesian rupiah hit a more than

two-year low.

The Thai baht took the largest hit, losing 0.7% while India’s rupee

gave up 0.2% to hit a record low for the third time this week, trading

as low as 79.105 to the dollar.

U.S. consumer spending, which accounts for more than two-thirds of the

country’s economic activity, rose less than expected in May, as higher prices

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led households to cut back. Inflation-adjusted consumer spending even showed a

contraction.

Uncertainty over the economic outlook drove safe-haven flows to the

greenback, lifting the dollar index by about 0.3% and further pressuring

emerging Asian currencies.

“In general, the growing concerns over U.S. and global growth is keeping

pressure on Asian currencies,” said Alvin Tan, head of Asia FX strategy at RBC

Capital Markets.

The Philippine peso and Singapore dollar also gave up 0.4% and 0.2%,

respectively.

The Indonesian rupiah slid 0.5%, hitting its lowest since May 2020

and trading at 14,970 to the dollar. The moves followed an inflation reading

that showed core inflation coming in below market expectations, even as the

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headline figure breached the central bank’s target range.

Indonesia’s central bank governor said lower core inflation means it has

some flexibility to not hike rates in a rush.

Analysts at Goldman Sachs expected the Bank Indonesia to begin hiking as

early as July, and forecast 125 basis points of cumulative hikes over the rest

of the year.

“Some recent softening in the commodity outlook on global growth concerns

could be exacerbating market concerns over inflation in Indonesia,” analysts at

Maybank said.

The South Korean won, however, gained 0.1% amid broader weakness.

RBC’s Tan said the move was likely down to strength in the Japanese yen,

as the two countries export similar goods, their currencies tend to be

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correlated to some extent.

The weak U.S. data also weighed on the country’s yields and

Asian yields mirrored the moves.

Singapore’s 10-year benchmark yield dropped 6.5 basis points to

2.898%, while Indonesia’s was down 1.9 basis points at 7.230%.

Across Asia, manufacturing activity slowed in June due to supply disruptions

from China’s COVID-19 lockdowns, a series of surveys showed. China’s

manufacturing activity, however, expanded at its fastest pace in 13 months.

Stock markets in Asia were mostly in the red, with indexes in India

losing 1% and those in Indonesia down 0.9%. However, Philippine stocks

managed an 0.8% rise.

HIGHLIGHTS:

** New Philippines central bank governor Felipe Medalla takes office on

Friday

** Taiwan’s PMI contracts, Taiwanese stocks lose 2.9%, currency

down 0.2%

Asia stock indexes and currencies

at 0213 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan +0.47 -14.8 <.n2>

China EC>

India -0.12 -5.98 <.ns ei>

Indonesi -0.47 -4.78 <.jk a se>

Malaysia -0.05 -5.54 <.kl se>

Philippi -0.43 -7.71 <.ps nes i>

S.Korea 11>

Singapor -0.18 -3.11 <.st e i>

Taiwan -0.23 -7.07 <.tw ii>

Thailand -0.66 -6.04 <.se ti>

(Reporting by Harshita Swaminathan; Editing by Sam Holmes)