Emerging Markets - Asian currencies slump badly as Taiwan stocks close at record high

MANILA (Reuters): Taiwan's stocks closed at a record high on Tuesday amid higher inflows into several Asian equities, while most regional currencies weakened against the dollar as strong economic data pushed back against bets on earlier US rate cuts.

Taiwan's benchmark index rose 1.2% to close at a record high of 20,466.570 points.

The Malaysian and South Korean main shares indexes jumped 0.4% and 0.2%, respectively.

"In Taiwan and South Korea, the equity markets are very tech focused and a global equity bull market has been driven by the tech sector particularly in Taiwan and Korea," said Alvin Tan, who heads Asia FX strategy at RBC Capital Markets.

"But that's obviously not helping Taiwan dollar or even the South Korean won and that's because the US dollar is basically strong right across the board."

Traders dialled back expectations of Federal Reserve rate cuts after data on Monday showed US manufacturing grew for the first time in 1-1/2 years last month due to a production rebound and increased new orders.

The robust data sent the benchmark U.S. 10-year Treasury yield to as high as 4.337%, its strongest level since March 18. This underpinned the U.S. dollar's climb on Tuesday.

The index that measures the strength of greenback against rival currencies rose by 0.3% to 105.067. Meanwhile, the MSCI index for emerging markets currencies fell by 0.3%.

In South-East Asia, the Thai baht fell 0.2% to its lowest in nearly six months after the region's second-largest economy approved a plan to raise its budget deficit next year despite fiscal concerns.

The baht has fallen 6.9% so far this year, making it the second-worst performer in Asia. Among other currencies, the Taiwanese dollar depreciated 0.3% to its lowest since Nov. 15.

The Malaysian ringgit slipped 0.5% to a five-week low. The South Korean won also dipped 0.2% and touched its lowest level in five months. Consumer prices in South Korea last month rose 3.1%, matching market expectations and the previous month's pace.

An official at Bank Indonesia said the central bank continued to intervene in the foreign exchange market to stabilise the currency, after the rupiah declined again on Tuesday. It was last down 0.3% at 15,915 per U.S. dollar, a level not seen since October 2023.

Indonesia's benchmark index also fell 0.4%, a day after data showed annual inflation in March rose at the quickest pace in seven months.

"With USDIDR approaching 16000, another 25bp rate hike to defend the IDR is not out of the question for Bank Indonesia," Barclays' analysts wrote. Investors are on the lookout for inflation data from the Philippines on Friday, an important metric for central banks in setting the tone for their monetary policies. - Reuters

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