Asian currencies inch higher ahead of U.S. inflation data

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Asia’s emerging market currencies crawled higher on

Thursday as investors awaited a crucial U.S. inflation report due later in the

day that could provide a clearer signal on when the Federal Reserve may begin

discussing tapering its monetary stimulus.

The Taiwan dollar led gains with a 0.3% climb, while most others

were trading roughly flat. The Indonesian rupiah, one of emerging

markets’ highest-yielding currencies, firmed around 0.1%.

Traders have adopted a cautious approach while dealing with Asia’s

risk-sensitive currencies ahead of the inflation report, given the pace of the

U.S. economic recovery and vaccination campaign, prompting some to question

whether the Fed should begin discussing early tapering as price pressures

emerge.

U.S. 10-year Treasuries yields, which have helped prop up the

dollar in recent months, were at 1.4789% in late Asian trade, while a further

retreat below 1.47% could take yields to the lowest since March 4.

Asia’s emerging stocks markets also rose on Thursday, with Taiwan’s

benchmark up 1.1%, while Indonesian equities were the only other

to cross gains of more than half a percent.

“Today’s CPI numbers could prove scorching,” Eugene Leo, a rates strategist

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at DBS said, pointing to expectations for a 0.4% month-on-month rise.

“However, we do not think that this would be sufficient to change the

transitory price pressures narrative that the Fed has painted.”

The Fed has stuck to its line that price pressures are transitory and

monetary stimulus will stay in place for some time yet, while some analysts have

also pointed to payrolls data last week that showed hiring did not grow as fast

as expected.

The data precedes the Fed policy meeting next week, while locally the

central banks of Indonesia, Taiwan and Japan will also meet. The week after that

is the Philippines’ turn.

Singapore stocks crept up 0.3% as the city-state heads towards the

end of month-long curbs on gatherings. Analysts said details of the reopening

could stoke further gains.

“There’s potentially always going to be some sort of positive knee-jerk

reaction, just like there was a negative knee-jerk reaction when this

heightened-alert phase was announced,” said Adrian Loh, head of research at

brokerage UOB Kay Hian.

He added that that any reaction might focus on locally-exposed REITs.

Helping to boost Indonesian shares were retail sales figures from April that

expanded for the first time in 17 months.

The benchmark index is up about 2.6% so far this month, while the rupiah has

appreciated slightly and bond yields have remained relatively stable. Yields did

fall on Thursday, though.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields fell 9.2 basis points to 6.345%​​​​

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** Comfortdelgro Corp Ltd and Singapore Airlines Ltd led

gains in the city-state, followed by SATS Ltd

** As Fed taper looms, global central banks eye their own exits from

stimulus

Asia stock indexes and currencies at 0634 GMT

COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY % YTD % DAILY % YTD %

Japan +0.11 -5.71 0.34 5.52

China +0.04 +2.26 0.52 3.94

India -0.02 +0.10 0.43 12.31

Indonesia +0.11 -1.37 0.90 2.06

Malaysia +0.00 -2.33 0.07 -2.74

Philippines -0.22 +0.55 -0.39 -3.70

S.Korea -0.04 -2.65 0.26 12.22

Singapore +0.02 -0.21 0.31 11.23

Taiwan +0.30 +2.89 1.14 16.47

Thailand +0.06 -3.76 0.14 12.36

(Reporting by Nikhil Kurian Nainan in Bengaluru and Chen Lin in Singapore;

Editing by Christopher Cushing and Sherry Jacob-Phillips)

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