U.S. dollar weakness and easing China COVID curbs boost Asian currencies

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Most Asian emerging currencies

strengthened on Monday as a weaker U.S. dollar and signs of

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China easing its strict zero-COVID strategy lifted risk

sentiment, with the yuan leading gains alongside Vietnam’s dong.

The yuan rose 1.4% against the dollar, hitting

its highest since Sept. 13, while stocks in Shanghai

advanced 1.5%.

On Sunday, more Chinese cities announced an easing of

coronavirus curbs, spurring the world’s second-largest economy

to move towards softening its stance on the zero-COVID strategy

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that prompted unprecedented protests last weekend.

The easing COVID curbs raised hopes over the global growth

outlook and increased demand for commodities in Southeast Asia’s

biggest trading partner, thereby boosting investors’ appetite

for riskier assets.

“A China shifting towards a more dynamic, flexible COVID

strategy would reduce the risk of weaker growth and should boost

optimism on China and related assets,” analysts at Barclays

said.

The dollar index, which measures the greenback

against six major peers, fell 0.2% to 104.23.

Analysts at Morgan Stanley upgraded their stance on

emerging markets as well as China to “overweight,” underpinned

by Beijing’s easing COVID policy and the resultant likely

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normalization in the economy, as well as a sustained weakening

in the U.S. dollar.

The Vietnamese dong appreciated 1.9% and posted its

best session since Sept. 2010 on broader weakness in dollar and

inflows from foreign borrowings by Vietnam Technological And

Commercial Joint Stock Bank and Masan Group,

according to a market source.

Malaysia’s ringgit, which has lost 4.6% so far this

year, firmed 0.5% to hit its highest level since May 6. Since

last week, the currency has drawn support from the appointment

of Anwar Ibrahim as prime minister.

Anwar, who will also serve as Malaysia’s finance minister,

announced new cabinet appointments on Friday. Markets are now

waiting for a revised 2023 budget before the year end.

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“The unveiling of the new cabinet ‘relatively’ quickly

helped remove some political uncertainty,” analysts at Maybank

wrote in a note.

Elsewhere, the Philippines lowered its economic growth

target for 2023, taking into account an anticipated weakening in

global activity, but kept its expansion goals for the succeeding

five years.

The peso depreciated 0.2%, while stocks in Manila

rose 0.6%.

Equities in Asia were mixed, with South Korea’s benchmark

index and stocks in Mumbai shedding 0.6% and

0.3%, respectively. Singapore’s benchmark index added

0.4%.

Markets in Thailand were closed on account of a public

holiday.

HIGHLIGHTS:

** China c.bank extends bilateral currency swap agreement

with Macau for three years

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** Indonesia c.bank says digital rupiah currency can be used

in metaverse

** Indonesian 10-year benchmark yields rise 3.7 basis points

to 6.880%

The following table shows rates for Asian currencies against

the dollar at 0625 GMT.

Asia stock indexes and currencies at

0625 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.21 -14.4 <.n2>

China EC>

India -0.32 -8.89 <.ns ei>

Indonesi +0.10 -7.53 <.jk a se>

Malaysia +0.46 -4.56 <.kl se>

Philippi -0.21 -8.64 <.ps nes i>

S.Korea 11>

Singapor +0.45 +0.25 <.st e i>

Taiwan +0.49 -9.08 <.tw ii>

Thailand – -3.90 <.se ti>

(Reporting by Upasana Singh in Bengaluru, additional reporting

by Tom Westbrook in Singapore; Editing by Dhanya Ann Thoppil)