Emerging markets: Most Asian FX weaken as Philippine peso flat as country's inflation hit three-year high

MANILA, June 7 (Reuters): Most Asia currencies dipped on Tuesday against the dollar as the greenback rallied amid concerns over rapid inflation, which also pushed US bond yields higher, while the Philippine peso was flat after the country's inflation scaled a three-year high.

The Philippine peso shed early gains after Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said inflationary pressures are likely to persist beyond 2022, but pointed out that the pace and timing of any further policy actions will be data-driven.

"We expect price pressures to persist in the near term, given the supply chain disruptions coupled with surprisingly resilient domestic demand," Nicholas Mapa, senior economist for the Philippines at ING, said.

BSP can retain its hawkish bias for the rest of the year. A 25 basis points (bps) hike is expected in the next meeting with a punchy 50 bps also in play, he added. With inflation accelerating beyond the BSP's target range of 2% to 4%, the Philippines said it would cut tariffs for rice, corn and pork imported from suppliers outside Southeast Asia until the end of 2022.

Mapa, however, warned that incoming BSP governor Felipe Medalla maintained a rather dovish stand and it would be difficult to gauge how aggressive BSP would be when he took over on July 1. The South Korean won led losses among other Asian currencies to weaken 1.4% against the dollar, its biggest drop in nearly two weeks.

The Singapore dollar lost 0.2% while the baht and Taiwan dollar eased 0.4% each.

The U.S. 10-year treasury yields climbed to 3.05% for the first time in nearly four weeks ahead of consumer price data on Friday.

"Ahead of the upcoming data and the Federal Reserve meetings, U.S. treasury yields are likely to remain heavy, so a push up to the old highs of 3.2% cannot be ruled out in coming days," Westpac analysts wrote in a note.

"We see the multi-week price action as a broad range trade as the market awaits the impact of upcoming 50 basis points rate hikes from the Fed," they added.

Stocks were mixed in Asia as overnight jitters on Wall Street offset confidence from the improving Covid-19 situation in China and the potential easing of regulatory constraints on Chinese tech companies.

South Korean stocks fell 1.5% to their worst day since May 24, followed by equities in India, which lost as much as 1.2% to their biggest drop since May 19. Malaysian equities skid as much as 0.6% to hit their lowest since Feb. 7.

Meanwhile, elevated prices of oil are also putting pressure on Asian markets, many of which are net importers of the commodity. An anticipated recovery in Chinese demand and doubts over OPEC+ producers' decision to increase output have continued to push oil prices higher. - Reuters