Asian currencies weaken on caution ahead of US inflation data

MOST Asian currencies slipped against the dollar on Monday, as traders awaited U.S. inflation data to assess the Federal Reserve's policy outlook, especially regarding potential interest rate cuts amid shifting market expectations. The Philippine peso slipped 0.7%, having retreated 4.2% so far this year.

The Indonesian rupiah fell 0.3% to its lowest level in almost two weeks, below the psychologically important 16,000 per dollar level. The Bangko Sentral ng Pilipinas is slated to hold its monetary policy meeting on Thursday and is expected to keep rates steady at 6.5%.

"The BSP had previously given comments of support for the PHP and we believe that the USD/PHP can meet some limit near term around the 58.00 mark," Alan Lau Sie Ping, a senior forex strategist at Maybank said.

The Thai baht and Malaysian ringgit were down just over 1% each, with other regional currencies remaining subdued as the greenback consolidated against peers ahead of the U.S. consumer inflation data for April, due on Wednesday. The dollar index was last steady at 105.320.

A low U.S. inflation figure could boost wagers the Federal Reserve will cut rates as soon as July, while a stronger outcome could push the prospect of an easing past September. Analysts at SMBC don't expect the dollar to strengthen too much against Asian currencies in the short term regardless of whether U.S. inflation data beats expectations or not due to continuous intervention by Asian central banks.

In stock markets, the benchmark indexes in Philippines and Taiwan jumped 1.2% and 0.7%, respectively. Indian stocks fell 0.3%. Chinese markets were choppy as investors pondered mixed economic data, while trade tensions with the United States hurt sentiment. Shanghai stocks fell 0.3%, after reports stated that the U.S. was poised to announce tariffs on Chinese electric vehicle and other strategic sectors.

Data over the weekend showed China's consumer prices rose for a third consecutive month, helping to soothe worries about a slide into prolonged deflation. But credit data came in soft for last month, with new bank lending falling more than expected.

Market participants are keeping a watch for India's inflation data expected later in the day. Other key events to watch for this week are China's industrial production data and central bank policy decision and Indonesia's trade data.


** South Korea to extend currency swap with Malaysia, BOK says

** Japan on track to normalise monetary policy, says ruling party heavyweight

** China to kick off 1 trillion yuan stimulus bond issues this week - Reuters

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Asian , currencies , inflation , Federal Reserve


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