MANILA (Reuters): Emerging Asian currencies were broadly lower on Tuesday against the US dollar as investors focused on stimulus measures from Beijing to support its ailing post-pandemic recovery, while stock markets in the region were rangebound.
The Chinese yuan fell 0.3% and equities in Shanghai dipped 0.1%.
A private sector survey showed China's factory activity growth contracted for the first time in three months, while support measures announced by the State Council were seen short of specifics to bolster broader consumption.
The data was in line with the government's official PMI on Monday, raising challenges for policymakers seeking to revive momentum in China's post-COVID recovery amid high youth unemployment, mounting local debt pressure and weak demand.
"Investors are cautiously optimistic on the stimulus measures from China so far in response to the economic slowdown but there is a risk that the measures might not go far enough to create enough momentum for a full-fledged recovery," said Mahesh Sethuraman, head of sales trading at Saxo Singapore.
"Investors will keep a close watch on any signs of recovery in the housing market particularly."
The Japanese yen depreciated 0.3% to hit a fresh three-week low, weighed down by the Bank of Japan's (BOJ) steps last week to tweak its yield curve control policy.
On Friday, the BOJ took another step toward a slow shift away from decades of massive monetary stimulus, saying it would offer to buy 10-year Japanese government bonds at 1.0% in fixed-rate operations, instead of the previous rate of 0.5%.
South Korea's won weakened 0.7%, while Malaysia's ringgit was trading flat.
"Even a modest strengthening of the yen is likely to shore up oversold currencies across the region such as the Korean won and Malaysian ringgit," said Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management.
The dollar index rose 0.2% as of 0716 GMT, further adding pressure on riskier Asian assets. Indonesia's rupiah depreciated 0.3%, while equities in Jakarta dropped 0.5%.
Annual inflation in South-East Asia's largest economy cooled further to 3.08% in July, moving closer to the middle of the central bank's target range of 2%-4%.
Elsewhere, South Korea's exports fell more than expected in July and at the steepest pace in more than three years, raising concerns that the downturn may drag on longer than expected.
Markets in Thailand were closed for a public holiday. Bank of Thailand (BOT) is scheduled to announce its monetary policy decision on Wednesday, with 18 out of 22 economists polled by Reuters expecting the central bank to deliver a final 25-basis-point interest rate hike. - Reuters
