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MANILA, July 11 (Reuters): Most Asian currencies started the week on a subdued note on Monday, as concerns about the global economic outlook drove investors towards the safe-haven dollar, ahead of key data by the United States and China this week.
China's yuan, the Singaporean dollar and South Korea's won declined between 0.1% and 0.2%, while the Indian rupee weakened to a fresh record low in the face of broad strength in the US dollar.
The greenback was perched near a 20-year peak, as a hawkish US Federal Reserve and the possibility of a global recession persuaded investors to switch to the safety of U.S. bonds.
Stronger-than-expected US labour market data has bolstered expectations the Fed will deliver another 75-basis-point rate hike later this month, a move that could pile further pressure on beaten down Asian currencies.
"This week's focus pivots back to inflation, particularly the U.S. CPI (consumer price index) and the inherent hawkish Fed policy implications," said Stephen Innes, managing partner at SPI Asset Management.
Rising Covid-19 cases in China are adding to worries in the region. Multiple cities are enforcing fresh curbs, ranging from business suspensions to lockdowns, to stifle new clusters.
Shanghai, the country's economic hub, is bracing for another mass testing campaign after detecting the BA.5 Omicron sub-variant.
Re-introduction of strict lockdown measures in China could trigger selling pressure on Asian emerging market assets, said Poon Panichpibool, a markets strategist at Krung Thai Bank.
China shares tumbled as much as 1.8% to hit their lowest since June 23.
Stocks in Taiwan and Philippines fell 0.9% and 0.7%, respectively. Market participants are unlikely to place big bets on the yuan before a slew of key data release this week, including China's second-quarter GDP numbers.
Elevated commodity prices and narrowing interest rate differentials have weighed heavily on most Asian currencies. The Philippine peso and Thai baht have fallen 9.7% and 7.6% this year, respectively.
The Philippine central bank's governor said it is prepared to raise its policy rates by 50 bps at its meeting in August, and follow up with further policy actions to control inflation and counter currency depreciation.
Thailand's central bank on Friday said they would let the baht move in line with market forces but will manage any excessive volatility in the currency. On Monday, the peso was down 0.2%, while the baht traded flat.
The Sri Lankan rupee was down 0.3%, as President Gotabaya Rajapaksa informed Prime Minister Ranil Wickremesinghe that he will resign, after tens of thousands of protesters stormed the official residences of both men.
The stock market in Singapore, and equity and currency markets in Malaysia were closed on Monday due to the Hari Raya Aidil Adha holidays. - Reuters
