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Asian currencies firm on stronger case for rate cuts
EMERGING Asian currencies rose on Wednesday after weak US manufacturing readings dented the dollar, while the yuan found support from a survey showing robust services sector activity in China last month.
The greenback pulled back from a two-year peak after data showed US manufacturing activity contracted for the first time in three years last month, prompting investors to raise bets on further rate cuts by the Federal Reserve this year.
The dollar stood 0.1 per cent lower at 98.925 against a basket of six major currencies. After a firm open, the Chinese onshore yuan rose 0.2 per cent to 7.166 against the dollar, moving off the 11-year lows it had clung to recently.
Yet again, the central bank's official midpoint fix was stronger than expected, which added to the yuan's support. Sentiment was also helped by a private survey that showed China's services sector expanded at the fastest pace in three months in August."Overall, Asian FX may receive a get-out-of-jail card for today, if the markets continue to focus on USD weakness," analysts at OCBC wrote in a note. However, they added that given the fragility of the global economy outside the United States, the dollar's vulnerability overnight may prove to be transient.
The Indian rupee recovered 0.3 per cent after a sharp drop in the previous session, while the Korean won added 0.5 per cent. The Malaysian ringgit firmed 0.3 per cent after data showed the country's exports rose unexpectedly in July, rebounding from a drop in the previous month.
The exports were lifted by solid demand for manufactured goods and higher shipments to China.
The Indonesian rupiah logged a 0.3 per cent gain, while the Thai baht rose 0.2 per cent. REUTERS