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Renewed global banking woes push Asian currencies lower; equities mixed

Tan KW
Publish date: Mon, 27 Mar 2023, 05:31 PM
Tan KW
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Asian currencies fell on Monday (March 27) after Germany's Deutsche Bank reignited fears of stress in the global banking sector, while the Chinese yuan edged lower after industrial profits dipped on lingering pandemic slumps.

China, which is the region's biggest trading partner, saw profits for industrial firms shrinking 22.9% in the first two months of this year as its factories struggled to come out of the Covid-related disruptions.

The Chinese yuan dipped 0.2%, while shares in Shanghai slipped 0.5%,
further weighed by geopolitical tensions.

Elsewhere, the Philippines peso weakened 0.2% after gaining about 0.7% last week, while the South Korean won depreciated 0.6%.

Markets globally were roiled as Deutsche Bank's credit default swaps, a form of insurance for bondholders, shot up to more than four-year highs, highlighting concerns among investors over the health of European banks.

"I'd expect markets to continue to adopt a cautious stance. But, given what is going on in Europe and the US, we could see investors retreat to Asian currencies, with the Japanese yen likely to be seen as a haven for investors," said Josh Gilbert a market analyst for eToro.   

In Asia, Thailand's baht depreciated the most in the region, falling 0.6%. The Bank of Thailand (BOT) is expected to raise interest rates by 25 basis points on Wednesday, a Reuters poll showed.

"We too expect 25 basis points (bps) hike in the policy rate, after which we expect BOT to remain on hold on the back of higher and steadier tourism income amidst China's reopening," said analysts at United Overseas Bank in a note.

Additionally, the Malaysian ringgit remained unmoved for the session. 

"The MYR was a major loser in Feb amid the broad USD strength but given the strong reversal in the greenback this month, the MYR has still not retraced a lot of its losses and therefore, may see more gains in the near term," said analysts at Maybank.

With analysts seeing limited risks for a spillover of the banking crisis in Asia, Barclays in a note said, "as (China's) recovery is expected to be more services-led, this should benefit the tourism sectors in Thailand, Singapore and Malaysia".

"Singapore is the only economy where we make a growth forecast downgrade, pulled down by greater-than-expected weakness in industrial production in Q1," added Barclays analysts.

Equities in Asia were mixed, with stocks in Singapore gaining 1%, while shares in the Philippines and Indonesia fell 0.2% and 0.6%, respectively.


  - Reuters


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