Emerging markets - Asian FX subdued in central bank-filled week

JAKARTA (Reuters): Most Asian currencies were on the back foot on Monday during a week laden with central bank meetings, after a strong jobs report from the world's largest economy weighed on hope of an interest rate cut in June.

The closely watched employment report late on Friday showed U.S. job growth beyond market expectation, pouring cold water on the narrative that the Federal Reserve will start slashing rates soon.

As a result, the US dollar index was firm at 104.34 at 0410 GMT. Traders are pricing in a 48.1% chance of a rate cut in June, down from 53.2%, showed the CME FedWatch tool.

"In particular, EM currencies are prone to a double whammy of a strong USD and high UST yields," said Vishnu Varathan, Mizuho Bank chief economist Asia ex-Japan in a client note.

Investors will be focused on central bank meetings this week and inflation prints, especially from the United States. The tone and data will likely set the outlook for interest rates starting, in Asia, with the Philippine central bank on Monday.

The Philippine peso was flat after reversing early losses ahead of a rate decision from the central bank which is widely expected to stand pat at 6.5%. Other central bank meetings in the region this week include Thailand, Singapore and South Korea.

The Reserve Bank of India held its lending rate unchanged at 6.5% last week. "One consequence of this imposed macro-stability risk is that EM (Asia) central banks are considerably more constrained in the option to cut rates ahead of the Fed, especially with fluid Fed pivot pushback," Varathan said.

Other currencies such as the Singapore dollar, Malaysian ringgit, South Korean won and Taiwan dollar traded flat to slightly lower.

Separately, US Treasury Secretary Janet Yellen met Chinese authorities on Monday to reiterate her case to rein in excess industrial capacity and boost domestic demand. Chinese markets reopened after a long weekend, with both shares and the yuan marginally down.

The Chinese currency touched a four-and-a-half month low last week, prompting central bank authorities to intervene in the market. Most Asian equities rose, with shares in Kuala Lumpur , Taipei and Seoul trading 0.2% to 0.6% higher.

However, stocks in Manila slipped around 0.8% to reach their lowest since early February, while those in Singapore were flat. Markets in Indonesia and Thailand were closed due to public holidays. - Reuters

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Emerging Market , Asian FX , Muted


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