Asian FX mixed after weak US data affirms Fed pause, stocks gain

© Reuters. Indonesian rupiah bank notes are seen at a money changer in Jakarta, Indonesia, October 14, 2022. REUTERS/Willy Kurniawan/File Photo

By Roushni Nair

(Reuters) - Most Asian currencies traded mixed on Tuesday as economic data in the U.S. pointed to sluggish growth in the country's services sector, further bolstering the case for a pause in interest rate hikes by the Federal Reserve next week.

The Malaysian ringgit and Thailand's baht depreciated as much as 0.5% and 0.7%, respectively. The Indonesian rupiah and India's rupee, on the other hand, rose 0.3% and 0.1%, respectively.

The U.S. services sector barely grew in May as new orders slowed, pushing the measure of prices paid by businesses for inputs to a three-year low.

The U.S. dollar was largely subdued as data disappointed to the downside. The dollar index fell to 103.96 at 0358 GMT, after climbing as high as 104.40 in the previous session.

A lacklustre U.S. dollar is positive news for emerging Asian markets as this could improve the balance of payment position while attracting capital inflows and reducing foreign debt burden.

"The unexpected rebound in U.S. CPI, an upward revision to 1Q GDP, and somewhat resilient labour market prints still point to some risks that the Fed may adopt a hawkish stance" at the upcoming policy meeting, even if it skips a hike, Frances Cheung, a rates strategist at OCBC, said in a note.

In the Philippines, annual inflation slowed for a fourth consecutive month in May as food prices continued to ease, giving the central bank room to keep benchmark interest rates steady at its next policy meeting on June 22.

The Bangko Sentral ng Pilipinas, however, projected an upside risk to inflation outlook for 2023 and 2024 citing supply constraints for key food items and the potential impact of the El Niño weather pattern on food prices and utility rates.

Poon Panichpibool, a markets strategist at Krung Thai Bank, expects the Philippine peso to remain well-supported in the long run.

"I think there will be limited downside risk for the peso to weaken further, meaning, after the widely expected Fed pause, the peso could be a bit stronger from the current level next week. That should apply to most of our EM currencies as well," he said.

Most equities markets in the region enjoyed an extended rally on easing interest rate jitters; shares in India, Taiwan, and Indonesia rose between 0.1% and 0.6%.

HIGHLIGHTS:

** Australia central bank raises rates by 25 basis points to 4.1%

** Thai exports seen rising up to 1% this year - shippers

** South Korean markets are closed for a public holiday

Asia

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COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY % YTD % DAILY % YTD %

Japan +0.00 -6.04 0.71% 26.17%

China -0.13 -2.95 0.05 4.68

India +0.12 +0.18 0.07 2.77

Indonesia +0.37 +4.96 0.49 -2.70

Malaysia -0.46 -4.26 -0.25 -7.87

Philippin -0.06 -0.97 -0.07 -0.75

es

S.Korea - -3.33 - 16.95

Singapore +0.03 -0.67 0.04 -1.87

Taiwan -0.07 -0.03 0.16 18.41

Thailand -0.50 -0.47 -0.05 -8.28