off-the-wire

EMERGING MARKETS-Asia FX dips after China PMI disappoints; focus on Fed meet

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Harshita Swaminathan May 2 (Reuters) - Most Asian currencies were flat or lower on Tuesday as investors held positions ahead of a U.S. central bank meeting, while local sentiment was dulled by an unexpected contraction in China's monthly manufacturing activity. The slow start to the week came after China on Sunday posted a surprise decline in manufacturing PMI for April, the first contraction since December 2022. Most Asian markets were closed on Monday for a holiday. "The contraction in manufacturing activity could put pressure on wages in both the manufacturing and service sectors. This would later turn into slower retail sales growth," ING analysts said.


While the onshore yuan did not trade on Monday and Tuesday, the offshore yuan fell 0.5% on Monday, and largely stuck to those levels on Tuesday, with the unit last seen at about 6.9571 to the dollar.


"EM (emerging market) Asia currencies could see some softening bias because China reopening momentum would be quite important to anchor the EM Asia currencies," said Ken Cheung, chief Asia FX strategist at Mizuho Bank.


Other Asian currencies such as the Thai baht and Indonesian rupiah fell about 0.2% each. Indonesia reported April inflation of 4.33%, a slowdown from March and slightly below market expectations. The rupiah was largely unchanged.


Among macro catalysts, eyes were on the U.S. Federal Reserve policy meeting late on Wednesday, where markets have largely priced in a 25 basis point hike.


The U.S. economic landscape has also been hit by the collapse of First Republic Bank, the largest U.S. bank failure since the 2008 financial crisis. Late on Monday, regulators seized the bank's assets and sold them to JPMorgan.


Cheung said the buyout "largely cleared the hurdle" for the Fed to deliver another 25 basis point hike this week.


Also on investors' minds was the U.S. debt ceiling crisis, with the Treasury warning the government may default on payments next month. U.S. President Joe Biden will meet four congressional leaders to discuss the matter next week.


Equity markets in Asia mostly traded higher, with the markets in South Korea , Malaysia and Singapore up between 0.4% and 0.7%.


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COUNTRY FX RIC FX FX INDEX STOCKS STOCKS DAILY YTD % DAILY YTD % % %
Japan -0.03 -4.66 0.13 11.75 India +0.10 +1.20 0.56 0.34 Indonesia -0.24 +5.88 -1.11 -0.17 Malaysia -0.02 -1.32 0.38 -4.96 Philippines +0.22 +0.52 0.32 1.21 S.Korea -0.23 -5.69 0.70 12.64 Singapore +0.01 +0.28 0.37 0.97 Taiwan -0.10 -0.20 0.21 10.42 Thailand -0.20 +1.11 0.09 -8.28
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic: World FX rates Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Harshita Swaminathan; Editing by Jamie Freed)

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