BENGALURU: Asian currencies edged up against a slightly softer U.S. dollar on Tuesday, with the South Korean won ticking up after robust second-quarter economic data, but caution persisted as markets braced for a steep rate hike from the U.S. Federal Reserve.
The Philippine peso and the Thai baht strengthened 0.1% and 0.2%, respectively, while the Malaysian ringgit dipped 0.1%.
The won rose 0.3% after data showed South Korea's economic growth unexpectedly picked up in the second quarter, as consumption rebounded after COVID-19 curbs eased. That supported the case for more rate hikes by the central bank.
The Bank of Korea estimated that gross domestic product for the April-June period had been 0.7% higher than in the previous quarter.
The GDP grew faster than the 0.4% rise tipped in a Reuters survey and the 0.6% recorded for the first quarter. Stocks rose 0.4%.
ANZ economist Krystal Tan, however, warned that growth momentum would be difficult to sustain, as "weak export prospects, high domestic inflation and rising interest rates all point to intensifying headwinds."
Investors in the region now await a likely 75 basis point rate increase from the Fed this week, with markets pricing in a chance of about 10% for a larger hike.
"The wait-and-see sentiments in the lead-up to the Fed meeting this week may drive some paring down of risk positions," said Yeap Jun Rong, market strategist at IG in Singapore.
Stocks in Kuala Lumpur, Mumbai, and Bangkok declined between 0.2% and 0.8%.
Stocks in Shanghai, however, rebounded as real estate developers continued to rise on news that Beijing was planning to set up a fund to aid the troubled industry.
But lingering concerns over elevated domestic COVID-19 cases weighed on the yuan, which traded flat. Markets are also eyeing preliminary data for Taiwan's GDP.
Economists estimate it expanded at a slightly slower pace in the second quarter, hit by COVID-19 lockdowns in top export market China and a surge in domestic infections.
Taiwanese stocks were down 0.9%, a day after China delivered sterner warnings to U.S. officials about House Speaker Nancy Pelosi's possible visit to Taiwan.
On Monday, official data showed that Singapore's key consumer price gauge had risen at its fastest pace in more than 13 years, increasing pressure on the central bank to consider further policy tightening.
Singapore's dollar was up 0.1%, and stocks rose 0.3%. In Thailand, the finance ministry maintained its 2022 economic growth forecast at 3.5%, underpinned by improved tourism and exports.
Shares in Thai Life Insurance Plc (TLI), which has conducted Southeast Asia's largest initial public offering so far this year, were down 3.1%.
HIGHLIGHTS
** Malaysia warns of weaker Q3 palm oil price as Indonesia scraps export levy
** Philippines' Marcos lays out ambitious policy agenda with farm sector in focus
** Indonesia c.bank says to ensure QE-era bond sales do not disrupt market
** Singapore industrial production for June up 2.2% year-on-year
