Weak China data outlook, US debt deal weigh on Asian FX

  • Forex
  • Tuesday, 30 May 2023

ASIAN currencies edged lower after investors flocked to the dollar on Tuesday, while markets weighed the implications of the U.S. debt ceiling deal and expectations of weak data from China's industrial sector dented risk appetite.

The Philippine peso and the Thai baht eased 0.6% and 0.4%, respectively, while equities in the regions each dipped 0.9% and 0.2%.

China will release official manufacturing PMI data on Wednesday.

A Reuters poll found factory activity likely contracted further in May, highlighting the stuttering recovery of the world's second-biggest economy from the pandemic.

"With optimism around China's reopening growth momentum fading, the potential spillovers into various other economies, whether through price or volumes, is being questioned again," analysts at Barclays said in a note.

The Chinese yuan eased 0.4%, while benchmarks in Shanghai and Hong Kong fell 0.3% and 2%, respectively.

A deal to lift the United States' $31.4 trillion debt limit announced by the White House and House Republicans late Saturday would avert a catastrophic U.S. default, but some investors are wary that proposed spending cuts could weigh on growth.

"The new fiscal limits could be something the Fed will need to consider at the upcoming June policy meeting as well," Maybank analysts said.

The tentative deal faces a rocky path ahead as a handful of hard-right Republican lawmakers on Monday said they would oppose it.

Elsewhere in emerging markets, Turkey's lira hit a fresh record low of 20.2 against the dollar, extending its losses after President Tayyip Erdogan won Sunday's presidential election runoff to maintain his rule into a third decade.

Stocks in Seoul rose nearly 1% after the finance ministry said it would cut tariffs from June on higher-priced edible products, including pork and sugar, to help ease living costs.

For the week ahead, investors are keenly awaiting India's GDP data, Thailand's trade data and interest rate decision due later this week.

India's economy is expected to grow about 6% this fiscal year, with a small increase in private investment, according to a Reuters poll of economists, who said lower growth and high inflation were the biggest risks to the outlook.


** Kenya's central bank holds main lending rate at 9.50%

** South Africa's central bank flags risks of capital outflows and sanctions

** India RBI chief flags governance gaps, stressed assets misreporting at some banks

** Japan's jobless rate falls to 2.6% in April - Reuters

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Asian , currencies , US dollar , debt ceiling , PMI , China


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