Most Asian FX weaken, Philippine peso flat on brisk inflation

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Most Asia currencies dipped on Tuesday

against the dollar as the greenback rallied amid concerns over

rapid inflation, which also pushed U.S bond yields higher, while

the Philippine peso was flat after the country’s inflation

scaled a three-year high.

The Philippine peso shed early gains after Bangko

Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said

inflationary pressures are likely to persist beyond 2022, but

pointed out that the pace and timing of any further policy

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actions will be data-driven.

“We expect price pressures to persist in the near term,

given the supply chain disruptions coupled with surprisingly

resilient domestic demand,” Nicholas Mapa, senior economist for

the Philippines at ING, said.

BSP can retain its hawkish bias for the rest of the year. A

25 basis points (bps) hike is expected in the next meeting with

a punchy 50 bps also in play, he added.

With inflation accelerating beyond the BSP’s target range of

2% to 4%, the Philippines said it would cut tariffs for rice,

corn and pork imported from suppliers outside Southeast Asia

until the end of 2022.

Mapa, however, warned that incoming BSP governor Felipe

Medalla maintained a rather dovish stand and it would be

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difficult to gauge how aggressive BSP would be when he took over

on July 1.

The South Korean won led losses among other Asian

currencies to weaken 1.4% against the dollar, its biggest drop

in nearly two weeks. The Singapore dollar lost 0.2% while

the baht and Taiwan dollar eased 0.4% each.

The U.S. 10-year treasury yields climbed to

3.05% for the first time in nearly four weeks ahead of consumer

price data on Friday.

“Ahead of the upcoming data and the Federal Reserve

meetings, U.S. treasury yields are likely to remain heavy, so a

push up to the old highs of 3.2% cannot be ruled out in coming

days,” Westpac analysts wrote in a note.

“We see the multi-week price action as a broad range trade

as the market awaits the impact of upcoming 50 basis points rate

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hikes from the Fed,” they added.

Stocks were mixed in Asia as overnight jitters on Wall

Street offset confidence from the improving COVID-19 situation

in China and the potential easing of regulatory constraints on

Chinese tech companies.

South Korean stocks fell 1.5% to their worst day

since May 24, followed by equities in India, which lost

as much as 1.2% to their biggest drop since May 19. Malaysian

equities skid as much as 0.6% to hit their lowest since

Feb. 7.

Meanwhile, elevated prices of oil are also putting pressure

on Asian markets, many of which are net importers of the

commodity. An anticipated recovery in Chinese demand and doubts

over OPEC+ producers’ decision to increase output have continued

to push oil prices higher.

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HIGHLIGHTS:

** Indonesian 10-year benchmark yields rise marginally to

7.023%

** Singapore 10-year benchmark yields rise 47 basis points

to 2.887%

** Thailand’s exports are expected to rise by 5% to 8% this

year, supported by a weaker baht

Asia stock indexes and

currencies at 0537 GMT

COUNTRY FX RIC FX FX YTD INDEX STOCKS STOCKS

DAILY % % DAILY YTD %

%

Japan -0.75 -13.39 0.10 -2.94

China

India -0.09 -4.34 -1.00 -5.48

Indonesi -0.08 -1.47 0.47 8.34

a

Malaysia -0.20 -5.28 -0.49 -2.37

Philippi +0.00 -3.67 0.47 -5.26

nes

S.Korea

Singapor -0.19 -2.18 -0.24 3.30

e

Taiwan -0.30 -6.15 -0.45 -9.27

Thailand -0.48 -3.13 -0.62 -1.32

(Reporting by Tejaswi Marthi in Bengaluru; Editing by Sherry

Jacob-Phillips)