- China yuan leads losses in Asian FX
- Most emerging Asian shares fall
- China stocks post bumper gains, before pulling back
Most emerging Asian currencies and equities fell on Tuesday, as escalating Middle East conflict and a repricing of U.S. Federal Reserve rate cut bets drove investors to the safe-haven dollar.
The Chinese yuan <CNY=CFXS>, led the losses among currencies, slumping as much as 1.1% to 7.085 per dollar. The onshore currency started trade after a week-long holiday.
A stronger-than-expected key jobs report from the world’s largest economy last week erased hopes of another outsized 50-basis-point interest rate cut at the Fed’s November policy meeting and has kept the dollar firm.
Markets are no longer fully pricing in a rate cut in November and are ascribing an 86% chance of a 25 basis points (bps) reduction, the CME FedWatch tool showed.
At 0415 GMT, the dollar index, which measures the greenback against six major rivals, was at 102.40, nestled near its seven-week high hit last Friday. [USD/]
That weighed on Asian currencies, with the South Korean won <KRW=KFTC>, Malaysian ringgit <MYR=>, Thailand baht <THB=TH> and Taiwan dollar <TWD=TP> trading between flat and 0.2% lower.
Moreover, rising Brent crude prices due to the conflict in the Middle East also kept the currencies of net oil importers from emerging Asia under check.
“Risk sentiment is generally poorer given tensions in the Middle East coming into focus. In addition, China’s NDRC has largely disappointed with no new stimulus measures announced. Asian FX is also tentative on the back of this poorer risk sentiment,” Shaun Lim, an FX Strategist with Maybank said.
Among Asian equities, shares in Singapore <.STI>, Taipei <.TWII>, Manila <.PSI> and Kuala Lumpur <.KLSE> traded between flat and 0.6% down.
Meanwhile, regional investors will eye central bank decisions from South Korea and India later this week, where the former is expected to cut its key interest rate, while the Reserve Bank of India is likely to keep monetary policy unchanged.
Indonesia and the Philippines have already kick-started their rate-cutting cycles, with more Asian central banks expected to join in.
On a positive note, China stocks <.SSEC> soared more than 10%, after markets reopened from a week-long public holiday, as investors cheered the string of stimulus measures, even as a conference from the country’s national economic and social planning agency did not add much to risk confidence.
Shanghai shares pared their initial bumper gains to trade about 5% higher.
“Hopes were raised but the delivery was disappointing. The post-opening rally in Chinese equities has fizzled out and the lack of follow-through is a setback,” Christopher Wong, a currency strategist with OCBC said.
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| Asian currencies and stocks at 0415 GMT | ||||||
| COUNTRY | FX RIC | FX DAILY % | FX YTD % | INDEX | STOCKS DAILY % | STOCKS YTD % |
| Japan | <JPY=> | +0.18 | -4.64 | <.N225> | -1.19 | 16.16 |
| China | <CNY=CFXS> | -0.72 | +0.51 | <.SSEC> | 4.81 | 17.54 |
| India | <INR=IN> | +0.05 | -0.87 | <.NSEI> | 0.04 | 14.14 |
| Indonesia | <IDR=> | +0.22 | -1.57 | <.JKSE> | 0.09 | 3.27 |
| Malaysia | <MYR=> | -0.16 | +7.12 | <.KLSE> | -0.15 | 12.25 |
| Philippines | <PHP=> | -0.09 | -2.57 | <.PSI> | -0.60 | 16.42 |
| S.Korea | <KRW=KFTC> | -0.32 | -4.51 | <.KS11> | -0.54 | -2.22 |
| Singapore | <SGD=> | +0.07 | +1.23 | <.STI> | 0.00 | 11.08 |
| Taiwan | <TWD=TP> | -0.11 | -4.45 | <.TWII> | -0.78 | 25.63 |
| Thailand | <THB=TH> | -0.12 | +1.95 | <.SETI> | 0.20 | 2.78 |
—Reporting by Sneha Kumar and Archishma Iyer in Bengaluru; Editing by Eileen Soreng
