ASIAN CURRENCIES TRADED FLAT, AND USD STABILISED
Most emerging Asian currencies traded flat to slightly lower as the U.S. dollar held steady and Treasury yields recovered from three-month lows ahead of a much anticipated Federal Reserve meeting.
Among regional stocks, Singapore's benchmark index climbed 0.8%. The Monetary Authority of Singapore on Monday released a survey which forecast the country's 2021 gross domestic product to expand more than expected.
In the Philippines, the peso fell 0.4% to a more than two-week low and was set for its worst day since Feb. 25 after President Rodrigo Duterte extended restrictions on Monday. Mobility curbs, partial and full, imposed for the entirety of Q2 point to a lower than predicted GDP report. Adding that some traders were also defensive ahead of the U.S. Federal Reserve's meeting. Stocks in Manila recouped earlier losses and added as much as 0.9%, however, partly helped by consumer stocks which benefited from increased dining capacity allowed in some parts of the Philippines.
The Indonesian rupiah lost 0.3% as it continued to hand back some recent gains before a Bank Indonesia (BI) meeting on Thursday. There was little effect on markets from a jump in Indonesia's May exports and imports, or from a BI statement that it was watching for possible policy tightening in the U.S. through to 2022. Separately, data showed foreigners were net buyers of Asian bonds in May, helped by a drop in U.S. bond yields and a recovery in the region's economic activity, though the risk of spiking infections kept buying at a four-month low.
The Australian dollar slipped to $0.7705 after minutes from the Reserve Bank of Australia's last meeting showed the bank was prepared to keep buying bonds even though the economy has recovered its pre-pandemic output. The impact of Britain and Australia announcing a trade deal was still unclear but is expected to benefit Australian farmers. Sterling was little changed against the dollar at $1.4118.
The US dollar stabilized near multi-week highs on Tuesday as traders turned cautious ahead of the Federal Reserve's two-day policy meeting which could provide hints of any plans to start tapering its bond purchases. So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come but recent economic data has raised concerns that price pressure could force an earlier stimulus withdrawal. Investors are hoping that U.S. retail sales and a manufacturing survey later on Tuesday will give clues as to what to expect from the Fed's statement and news conference on Wednesday. In the meantime though, prudence is palpable across trading floors.
The dollar index edged lower in the Asian session was down 0.1% at 90.40, hovering near multi-week highs. Yields on benchmark 10-year U.S. Treasuries were at 1.48%, well below the 1.60% level they were trading at toward the beginning of June. The euro rose 0.15% to $1.2126, just above a one-month low of $1.2093 it hit last week while the yen hit a seven-session low of 110.02 per dollar.
