Asia’s currencies rise with U.S. inflation concerns out of the way

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Indonesia’s rupiah led gains across

Asia’s risk-sensitive currencies on Friday, with bond yields at

four-month lows, after U.S. inflation data was enough to

convince investors price rises may be transitory and not affect

U.S. monetary stimulus for now.

South Korea’s won and Taiwan’s dollar

also gained around 0.4% as the greenback nursed small losses on

the back of the inflation report that had kept traders in Asia

on their toes all week, looking for any signal that it may

prompt the Federal Reserve to discuss early tapering.

The overnight data showed U.S. consumer prices up 5%

year-on-year, the sharpest rise in 12-years. But hefty

contributions to that from short-term rises in airline ticket

prices and used cars raised questions about how long the jump

might last.

U.S. Treasury yields fell to lows not seen since

early March, with traders saying short-covering was driving the

rally.

“With the global market backdrop turning more constructive

for bond investments, investors may re-focus on yield

differentials,” OCBC Bank analysts said in a note.

Asia’s emerging market currencies and bonds traditionally

yield more than their peers in developed markets, though are

considered riskier.

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The yield on Indonesia’s 10-year bonds, which

offer some of the highest returns in emerging markets, fell to

6.324%, the lowest level since mid-February.

Stocks markets in the region also largely gained, with South

Korea and Thailand leading the way with a rise

of half a percent.

In a sign of confidence, the Thai central bank has allowed

banks to pay interim dividends, saying they have sufficient

capital to deal with the impact of COVID-19 outbreaks. The

country’s top banks were up around 1%.

In Singapore, shares were flat and the local dollar

marginally higher.

The city-state on Thursday announced a phased easing of its

COVID-19 restrictions from next week with expectations for a

reopening largely factored in already. Analysts think the

bank-and-landlord-heavy Singapore benchmark has further to rise.

“I think in the Singapore market, there are still pockets of

opportunities to buy into some of these sectors which have not

done as well as, and not priced as much of the optimism,” said

Carmen Lee, Head of OCBC Investment Research.

Lee added that the financial sector has done well, but has

more upside.

With U.S. inflation data out of the way, eyes will now turn

to the Fed’s policy meeting next week, which will happen

alongside local meetings by Indonesia, Taiwan and Japan.

HIGHLIGHT:

** Thailand’s 10-year government bond yields fell 2 basis

points to 1.67%

** S.Korea to begin normalizing monetary policy when economy

sustains recovery – central bank

Asia stock indexes and currencies at 0356 GMT

COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY % YTD % DAILY % YTD %

Japan -0.07 -5.62 -0.02 5.49

China +0.09 +2.22 -0.25 3.71

India +0.00 +0.02 0.37 12.98

Indonesia +0.39 -1.06 -0.05 2.10

Malaysia +0.16 -2.24 -0.27 -3.17

Philippines +0.06 +0.67 0.09 -3.61

S.Korea +0.42 -2.24 0.55 12.84

Singapore +0.12 -0.07 0.02 11.23

Taiwan +0.39 +3.22 0.39 16.93

Thailand +0.29 -3.60 0.52 12.72

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

Singapore; Editing by Kenneth Maxwell)