Emerging Asian currencies declined on Tuesday, with the baht weakening the most, as more disappointing data from China fanned worries about the faltering recovery in the world’s second-largest economy.
The baht depreciated as much as 0.8% against the dollar to its lowest level in six weeks, trading around 35.30 to the dollar in offshore markets on Tuesday afternoon.
China’s July industrial output and retail sales growth slowed and undershot forecasts, adding to a raft of recent disappointing economic figures, suggesting policymakers may need to step up support measures to shore up the economy.
Authorities in Beijing also said they would stop releasing figures on youth unemployment, which reached a record 21.3% in June.
Less than an hour before the data came out, China’s central bank unexpectedly cut key policy interest rates for the second time in three months on, underlining the rapid loss of the post-Covid economic rebound.
“From a macro perspective, today’s policy decisions are somewhat helpful. They will help improve the debt-service ability of cash-strapped local governments and property companies,” analysts at ING wrote in a note. “But this isn’t a game-changing outcome, and so we doubt that market sentiment will dramatically improve just on this.”
The Chinese yuan declined as much as 0.4% to a nine-month low. The slide in the yuan was later contained, after state banks were seen selling US dollars to buy yuan in the onshore spot foreign-exchange market, as Reuters reported.
“We saw the 10-year US Treasury yields running high and with the People’s Bank of China rate cut this will lead to the rates difference widening between China and the US and put the renminbi under further pressure,” said Ken Cheung, chief Asia forex strategist at Mizuho Bank.
Cheung added that the slow Chinese economic recovery would continue to be a negative factor for regional currencies.
The Indonesian rupiah fell 0.2% and hovered near a five-month low. A Reuters poll found that Indonesia’s exports and imports likely continued a decline on a yearly basis in July amid weakening global trade, with its trade surplus seen shrinking.
The Philippine peso and the Malaysian ringgit declined 0.3% each.
The Philippine central bank ie expected to leave its key interest rate unchanged at 6.25% for a third consecutive meeting on Thursday and keep it there for the rest of the year to assess the impact of previous hikes on inflation, a Reuters poll found.