Asian currencies, equities jump ahead of US economic data

MOST emerging Asian currencies strengthened against the U.S. dollar on Tuesday ahead of key U.S. economic data this week, while Chinese shares led equities as investors welcomed Beijing’s efforts to support its ailing markets.

The Thai baht appreciated 0.3% while the Indonesian rupiah rose 0.2%.

Stocks in Shanghai jumped 1.1%, extending gains from Monday, while Jakarta’s benchmark index and Kuala Lumpur shares rose 0.4%.

Investors will be closely watching U.S. data this week for further cues on the Federal Reserve’s monetary policy trajectory, from the personal consumption expenditures price index, its preferred inflation gauge, which is due on Thursday, to non-farm payrolls data due on Friday.

JOLTS job openings figures for July and U.S. consumer confidence data for August are due later in the day.

Economists polled by Reuters expect job openings to come in at 9.465 million, easing slightly from June, while consumer confidence index is estimated to touch 116.0 this month, after hitting a two-year high of 117 in July.

Last week, Fed Chairman Jerome Powell suggested further rate increases may be needed to cool still-too-high inflation, though his promise to move with care at upcoming meetings made for some uncertainty.

“…The best is for the FOMC to keep rates on hold at the September FOMC meeting; thereafter, decision at each meeting remains to be highly data-dependent – our view has been that continued disinflation in core CPI shall be good enough for the Fed to conclude its rate hiking cycle,” OCBC said in a note.

Markets are pricing in a 78.5% chance of the Fed standing pat on interest rates next month, the CME FedWatch tool showed. However, the odds of a hike at the November meeting are now at 60.8%, up from 42% a week earlier.

Traders are also focused on official purchasing managers’ index (PMI) data from China for August due later this week, which is still expected to show activity is in the red.

The official PMI is expected to have edged up to 49.4 in August, a marginal improvement on the 49.3 recorded in July, according to the median forecast of 34 economists in a Reuters’ poll. An index reading above 50 indicates expansion in activity on a monthly basis while below that signals contraction.

“The China PMIs could bring another round of disappointment,” said Ken Cheung, chief Asia FX strategist at Mizuho Bank.

Over the weekend, China announced a halving in stock-trading stamp duties after Friday’s approval of affordable housing guidelines.

“Chinese investors are usually quite sensitive to stamp duties and the ability the leverage, but there are clearly headwinds in relying on the recent policies alone to boost sentiment and economic growth,” said Gary Ng, senior economist Asia Pacific at Natixis Corporate and Investment Banking.

In Southeast Asia, Malaysian ringgit appreciated 0.2% while the Singapore dollar jumped 0.1%.

Stocks in Seoul and Bangkok advanced 0.4%.

Bucking the trend, the Philippine peso fell 0.1% against the U.S. dollar and equities in Manila also slipped 0.1%.

Elsewhere, the Russian rouble and the Turkish lira weakened 1% and 0.3%, respectively.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields are down 3.5 basis points at 6.431%

** Chinese investors rush to offshore funds to offset domestic risks

** IMF managing director to meet leaders in China, go to Indonesia, India – Reuters