Asian currencies down after soft China data, Fed minutes in focus
Most emerging Asian currencies fell on Wednesday (5 July), as sentiment was hurt by soft services activity in the world's second-largest economy, while traders were also cautious before the release of the US Federal Reserve's minutes from its last policy review.
The latest data broadly tracked the official manufacturing purchasing managers' index released last week and highlighted weakening demand that is weighing on China's post-pandemic recovery momentum.
The yuan <CNY=CFXS> weakened 0.2%, while equities in Shanghai <.SSEC> dropped 0.5%.
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Philippine's peso <PHP=> depreciated 0.3% and led to losses in the region.
Data showed the country's annual inflation eased for a fifth straight month in June, reflecting a slower rise in food and transport costs.
Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate steady at 6.25% at its last two meetings in June and May, joining other central banks in the region which are dialling back their policy tightening including Bank Indonesia.
"Even though the Fed is likely to hike two more times, we do not expect more hikes from the BSP," analysts at Barclays said in a note.
"With inflation moderating, the BSP has recently been emphasising that its focus is now on domestic inflation and the Fed's actions are 'now less of a factor'."
Markets are now waiting on the release of minutes from the Federal Reserve's latest meeting later in the day and the non-farm payrolls report on Friday for further clues on the path of monetary policy.
"We seek clarity on Fed's tightening trajectory if inflationary pressures ease further ... and if China will unveil stimulus measures soon," said Christopher Wong, FX strategist at OCBC.
"A case of softer US data and China stimulus will be most optimal for risk sentiment and for the US dollar to trade softer."
Among other regional currencies, Thailand's baht <THB=TH> eased 0.1%. The country's headline consumer price index increased 0.23% in June from a year earlier, slowing from a 0.53% year-on-year rise in the previous month.
The South Korean won <KRW=KFTC> fell 0.2%. Indonesia's rupiah <IDR=>, the Singapore dollar <SGD=> and the Indian rupee <INR=IN> shed 0.1% each.
Stock markets in Asia were broadly lower, with equities in Manila <.PSI> and Seoul <.KS11> dropping 0.7% and 0.4%, respectively. Singapore's benchmark index <.STI> retreated 0.5%, while Thailand's equities <.SETI> declined 0.2%.
