Market participants are increasingly worried about tensions between the world's two top economies as US President Donald Trump blames China for the Covid-19 (coronavirus) pandemic that has killed more than 85,000 Americans.
Trump said he had no interest in speaking to his Chinese counterpart Xi Jinping right now and suggested he could even cut ties with the world's second-largest economy.
Meanwhile, China's industrial output expanded for the first time this year as the economy slowly emerged from coronavirus lockdowns. It rose 3.9% last month from a year earlier, far exceeding expectations, but retail sales and services activity continued to contract.
The Chinese yuan slipped 0.1% and was on its way to its biggest weekly drop in a month. The trade-reliant Singapore dollar and the South Korean won, both highly sensitive to China's economic fortunes, shed up to 0.2% each.
The won has particularly come under pressure due to a spike in new virus cases after restrictions were relaxed, and was set to post a weekly drop of 0.8%. Investors are closely watching China for clues on how long demand will take to bounce back as other countries start relaxing lockdown measures.
However, analysts are less optimistic about a rapid demand recovery. Mizuho Bank's Riki Ogawa wrote the "fact is, even as economies prepare to emerge from varying degrees of lockdowns, restoration of 'normalcy' is a much longer road."
"Threats of second wave of infections across Asia serve as a sobering warning against complacency about normalcy, just as complacency about the US-China Phase 1 deal leading to normalcy in global trade has backfired." HSBC slashed an already bleak global and emerging market growth forecast further, as lockdown restrictions extended through April and tentative economic re-openings drag on a return to business, trade and spending.
The Philippine peso weakened 0.5% to see its worst session in two weeks as several media outlets reported a severe Typhoon Vongfong was moving toward the main island of Luzon, forcing people to flee to evacuation centres.
The Indonesian rupiah firmed slightly after declining 0.3% earlier in the session. It was set to post a weekly gain of 0.4%. Data showed Indonesia logged a trade deficit in April after two straight months of surpluses as exports and imports continued to shrink due to disruption caused by the virus crisis. - Reuters
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