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Indonesia's 10-year bond yield slips to 15-month low
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China's factory activity skids in April - Caixin PMI
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Markets in Thailand and Malaysia closed
By Harish Sridharan May 4 (Reuters) - The South Korean won and Indonesia's rupiah led gains among Asian currencies, while regional bonds rallied on Thursday, after the U.S. Federal Reserve signalled a pause in its aggressive policy tightening cycle. The Fed, as expected, raised its benchmark interest rate by a quarter of a percentage point overnight, but an omission from its policy statement marked a change in tone, as it no longer said it "anticipates" further rate increases would be needed. A pause should give Fed officials time and space to assess inflationary trends and ongoing challenges such as the fallout from recent bank failures and the political standoff over the U.S. debt ceiling. All major Asian currencies strengthened. The rupiah appreciated as much as 0.8% to 14,570 per U.S. dollar, hitting its highest level since June 10, 2022. It pared some gains as the session progressed, and was last up 0.3%.
The Indonesian 10-year benchmark bond's yield slipped to 6.467% - its lowest level since February last year.
The rupiah is the best-performing currency in Asia this year, having risen over 6%. Bank Indonesia has stood pat on rates in its last three meetings and said that strong capital inflows are likely to support the currency.
"IndoGBs (Indonesian government bonds) benefit from the constructive bond environment in the U.S. at the moment, and a sanguine supply outlook domestically," said Frances Cheung, rates strategist at OCBC. "That said, chasing yields lower is not preferred given the still compressed yield differentials with U.S. Treasuries." U.S. Treasury yields dropped to 3.3337%. The greenback was down 0.1%. South Korea's won rose 1.3% in its biggest single-day gain in three weeks. The benchmark 10-year yield slipped to 3.279%. Equities mostly traded in narrow ranges. China's benchmark index was down 0.1%.
A private sector study showed China's factory activity unexpectedly dipped in April due to softer domestic demand, suggesting the manufacturing sector is losing momentum amid a bumpy post-COVID economic recovery. The yuan rose 0.3% - eyeing its best session since mid-April.
Markets in Malaysia were closed, a day after the country's central bank unexpectedly raised its benchmark interest rate by 25 basis points to 3%, which some economists suggest could mark the end of the current tightening cycle. Markets in Thailand were also shut for a local holiday. Meanwhile, the Hong Kong Monetary Authority (HKMA) raised its base rate charged through the overnight discount window by 25 basis points to 5.50%, its highest since January 2008, hours after the Fed delivered its 25 bps rate hike.
HIGHLIGHTS
** Benchmark 10-year bond yields in India falls
to lowest level since April 2022; last at 7.028%
** Indonesia economy likely grew 4.95% on year in Q1,
contracted vs quarter - Reuters Poll
** Hong Kong c.bank raises interest rates after Fed hike
Asia stock indexes and currencies at 0621 GMT
COUNTRY FX RIC FX FX INDEX STOCK STOCK
DAILY YTD % S S YTD
% DAILY %
%
Japan +0.22 -2.43 - 11.74
China +0.21 -0.05 0.70 8.33
India +0.12 +1.22 0.37 0.28
Indonesia +0.29 +6.34 0.24 -0.31
Malaysia - -1.12 - -4.65
Philippines +0.18 +0.83 1.06 1.68
S.Korea +1.11 -4.46 -0.13 11.71
Singapore +0.21 +0.93 0.04 0.37
Taiwan +0.18 +0.06 0.36 10.41
Thailand - +1.78 - -8.11
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic: World FX rates Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Harish Sridharan in Bengaluru; editing by Eileen Soreng)
