Asian currencies gain ground on promising China data, falling dollar

MAJOR emerging Asian currencies edged higher on Monday as the U.S. dollar eased ahead of key inflation data due later this week and investors cheered signs of stabilisation in China’s economy.

The Chinese yuan jumped about 0.8% against the dollar, the most since March, as the country’s central bank yanked the currency off a 16-year low by setting a daily midpoint guidance rate with the strongest bias on record.

Positive inflation data out of the world’s second-largest economy and more stimulus measures from Beijing also boosted broader sentiment.

Data released over the weekend showed that China’s consumer prices returned to positive territory in August while factory-gate price declines slowed.

“Recent China data may suggest very tentative signs of stabilisation,” said OCBC strategists Frances Cheung and Christopher Wong.

They, however, said it would be too early to say if it was really a turnaround due to the effects of economic support measures.

Most equity markets in Asia recouped early losses, while property and tech stocks dragged down the Hong Kong market. Hong Kong’s Hang Seng Property Index fell 3.8% as investors sold shares of debt-laden property companies.

“Sophisticated investors are not convinced that China is out of the woods with 34 out of China’s top 50 private-sector developers suffering delinquencies on offshore debt,” said Jessica Amir, a market strategist at trading platform Moomoo.

Chinese authorities in recent weeks have rolled out a series of measures, including easing borrowing rules, to support the debt-riddled property sector.

The yen firmed about 1% after a weekend report flagged a possible early end to the Bank of Japan’s negative interest rate policy. Japanese government bond yields surged across maturities, with the 10-year yield hitting a near-decade-high.

The dollar index, which capped last week its eight straight weeks of gains, fell 0.31% to 104.53.

“This week, investors will get a stagflation wake-up call, with the US September CPI expected to rise to its highest level since 2022 on a year-on-year basis,” added Amir.

The Thai baht gained 0.5% as the newly formed government finally got to work four months after a national election.

Prime minister Srettha Thavisin is set to announce his cabinet’s policies later in the day. Poon Panichpibool, a markets strategist at Krung Thai Bank, said the baht’s gains stemmed from signs of political stability and the yen’s gains against the dollar.

HIGHLIGHTS:

** Thai economy may grow 2.8% this year after new govt – deputy finmin

** Thai govt plans handouts, fuel prices cuts to revive economy-draft policy speech

** China’s central bank yanks yuan off 16-year low with strongest fixing bias – Reuters