Asian FX stumbles on US debt ceiling talks, China data

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Asian currencies struggled to advance

against the U.S. dollar on Wednesday, as softer Chinese economic

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data and the talks over the U.S. debt ceiling dampened investor

sentiment and stoked concerns of a global slowdown.

China’s new home prices rose for the fourth straight month

in April, but at a slower pace, official data revealed, adding

to concerns over the pace of recovery in a sector crucial to

China’s economic health. It followed downbeat data on Tuesday

that showed property investment and sales were falling sharply.

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“Underwhelming China activity data in April validate our

repeated warnings of overstated re-opening optimism, and

resultant blind spots to China’s structural and geo-political

challenges,” said Vishnu Varathan, head of economics and

strategy at Mizuho Bank.

The Shanghai SE Composite Index and Hong Kong

benchmark index dropped 0.5% and 1% respectively, while

the yuan lost 0.3%.

The currencies of China’s major trading partners also took a

hit. The Malaysian ringgit slipped 0.6%, falling to an

over two-month low, and the Indonesian rupiah dipped

0.4%.

In the U.S., President Joe Biden and top congressional

Republican Kevin McCarthy edged closer to a deal to avoid a

looming debt default.

Regional stock markets were largely mixed, however.

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“Overall, sentiment seems to be lacking strong directional

steer currently, which could (be due) to the anxiety over the

U.S. debt ceiling talks and next week’s PCE data,” said Robert

Carnell, regional head of research, Asia Pacific at ING.

Equities in Taiwan, South Korea, Malaysia

and the Philippines gained between 0.3% and 1.6%,

while India and Singapore declined 0.3% and 1.1%

respectively.

The drop in Singapore to a near two-month low was sparked by

data showing the country’s non-oil domestic exports fell 9.8%

year-over-year in April, weighed down by declines in both

electronic and non-electronic products.

The lackluster external demand conditions imply non-oil

domestic exports momentum could remain mired in a year-on-year

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contraction until the third quarter, said Selena Ling, OCBC’s

chief economist.

Meanwhile, the ambiguity over who will be Thailand’s next

prime minister persists, despite the two main opposition parties

agreeing to form a ruling coalition, due to possible opposition

from a military-appointed Senate, the party’s position on a

royal insult law and a complaint against its leader.

The Thai baht, which has shed 1.3% since last week,

lost 0.6% while stocks in the country fell 1.1%.

HIGHLIGHTS:

** US consumer spending appears solid early in second

quarter

** Japan emerges from recession on post-COVID consumer

rebound

** Federal Reserve Bank of Cleveland President Mester says

not yet at point where it can ‘hold’ rates

** Vietnam c.bank bought $6 bln this year to consolidate

FX reserves

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.31 -4.15 <.n2>

China EC>

India -0.19 +0.43 <.ns ei>

Indonesi -0.42 +4.62 <.jk a se>

Malaysia -0.64 -2.63 <.kl se>

Philippi -0.21 -0.94 <.ps nes i>

S.Korea 11>

Singapor -0.11 -0.14 <.st e i>

Taiwan -0.02 -0.34 <.tw ii>

Thailand -0.57 +1.02 <.se ti>

(Reporting by Mehr Bedi in Bengaluru; Editing by Jamie Freed

and Savio D’Souza)