Most Asian currencies eked out small gains against the dollar on Monday as China’s central bank cut a key interest rate to support an economy jolted by the coronavirus outbreak, helping counter a string of weak economic data from regional economies.
In a bid to soften the impact from the epidemic that has killed more than 1,700 people, the People’s Bank of China on Tuesday lowered the interest rate on its medium-term lending.
The move fuelled expectations of a reduction in the country’s benchmark loan prime rate, which will be announced on Thursday.
“Markets are caught between relief rallies positioning off declining infections rates accentuated by strong stimulus on one hand; and on the other hand, hemmed in by underlying caution given the uncertainty” surrounding the epidemic, Vishnu Varathan, senior economist at Mizuho Bank said in a note.
The interest rate cut, along with other support measures outlined by the finance minister on Sunday, pushed the Chinese yuan 0.2 percent higher, putting it on course to snap three sessions of declines.
The improvement in sentiment also buoyed most other Asian units, with the Taiwan dollar firming 0.2 percent.
The Thai baht was little changed data showed that Southeast Asia’s second-largest economy grew at its weakest pace in five years in 2019.
However, the Indonesian rupiah and the Indian rupee ticked lower, weighed down by weak trade data.
Indonesia’s trade gap widened sharply in January with the economy posting a trade deficit of $870 million in the first month of 2020, compared with an estimate of a $270 million deficit, according to a Reuters poll.
Meanwhile, India’s trade deficit rose slightly to $15.17 billion in January, the trade ministry said on Friday.
The Singapore dollar ticked up 0.1 percent, shrugging off a cut to the city-state’s 2020 growth and exports outlook on the expected economic impact from the coronavirus outbreak that poses a recession risk.
Singapore is expected to roll out a hefty package of measures to cushion the blow from the epidemic when it announces its budget on Tuesday. Analysts said that the impact from the epidemic has overtaken the US-China trade war as the predominant risk facing the Singapore economy. — Reuters
