Asian currencies looked for direction with the Indonesian rupiah leading the laggards against a firm dollar amid stuttering growth in China and robust US economic data even as hopes of a debt ceiling deal pushed shares higher.
Overnight data from the world’s largest economy indicated a tight labor market, reinforcing expectations that the US central bank could raise rates again in June, strengthening the dollar.
Hawkish rhetoric from some Fed officials also pushed the dollar index higher, which stood at 103.3, near a two-month high at 0645 GMT.
“The mixed comments from Fed speakers in recent times on a hike or a pause at the next upcoming meeting appears to gradually be paring back market expectations that the Fed’s tightening cycle is over just yet,” Maybank’s analysts wrote in a note.
Markets are now pricing in a 36 percent chance of a 25 basis-point hike when the Fed meets next month, as against a 10 percent bet previously, according to the CME Watch Tool.
Additionally, growth concerns from China added to the prevailing weak sentiment surrounding Asia, as data from over the week showed that the economic trajectory is faltering post the COVID-19 scenario.
The Chinese yuan had shed about 0.1 percent before rebounding to trade marginally higher, with trading operations suggesting that authorities were trying to manage the rapidly falling currency.
The currency has lost 1.1 percent for the week.
Among Asian currencies, the Indonesian rupiah fell the most, dropping around 0.5 percent to hit the lowest in a month. The currency, however, has turned the best performing unit, gaining more than 4 percent against the dollar so far this year.
The Malaysian ringgit and the Thai baht fell about 0.3 percent and 0.1 percent, respectively.
“In terms of the USD/RMB pair, that has been a drag on the Asian currencies,” Moh Siong Sim, an FX Strategist from Bank of Singapore said. “The concern about sustainability over China’s growth has picked up and hence leading to the point where the yuan broke the psychological 7 level.” – Reuters
