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Asian FX edges up on surprising China factory growth, Fed-pausing bets



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China May factory activity unexpectedly swung to growth - survey

Markets trim bets that U.S. Fed will raise rates this month

U.S. debt deal clears House of Representatives

By Riya Sharma

June 1 (Reuters) -Most Asian currencies rose against a retreating dollar on Thursday, buoyed by receding bets for a U.S. rate hike this month and relief over a surprise swing back to growth in a private survey of Chinese factory activity.

The yuan CNY=CFXS rose 0.3% against the U.S. dollar, reversing some of its losses from the previous session, where it had slumped to a six-month low, while the Indian rupee INR=IN edged up 0.3%, supported by much higher-than-expected GDP growth.

In a glimmer of hope, China's factory activity unexpectedly swung to growth in May from the previous month's decline, driven by improved production and demand, helping struggling firms that have been hit by slumping profits, a survey showed.

On Wednesday, official data had showed that China's factory activity shrank faster than expected in May on weakening demand.

Asian economies are heavily reliant on the strength of China's economy, which has been wavering as a post-COVID recovery loses momentum.

"A key part of the rebound in Asian currencies today relates to the surprise swing back to growth in Chinese factory activity, which follows yesterday's selling in the yuan and Asian currencies after disappointing official PMI data," said Khoon Goh, head of Asia research at ANZ.

"It looks like the short positions were probably closed out and a slight weakening in the U.S. dollar overnight also contributed towards the rebound in the region," Goh said.

The U.S. dollar =USD retreated from a two-week top against major peers as Federal Reserve officials on Wednesday pointed towards a rate hike "skip" in June, even as the passing of the U.S. debt ceiling bill in the House of Representatives gave safe haven support to the greenback.

Separately, South Korea's exports fell for an eighth straight month in May in annual terms, but the pace was slower than expected with signs that the worst had passed for chip and China-bound shipments.

The won KRW=KFTC was 0.7% higher and leading gains among its Asian peers, while South Korean shares .KS11 slipped 0.2%.

Equities in the region were mixed, with indexes in India .NSEI and Singapore .STI both up 0.2%, while stocks in Thailand .SETI slipped 0.4%.

Sri Lankan shares .CSE rose over 1% after the country's central bank cut key interest rates by 250 basis points on easing inflation, signalling that the South Asian nation was emerging from a devastating financial crisis.

HIGHLIGHTS:

** The blue-chip CSI300 Index .CSI300 climbed 0.7%, while the Shanghai Composite Index .SSEC gained 0.4%

**Hong Kong's benchmark Hang Seng .HSI was up 0.8%, and the Hang Seng China Enterprises Index .HSCE added 0.9%.


Asia stock indexes and currencies at 0452 GMT





COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

-0.06

-5.96

.N225

0.76

21.02

China

CNY=CFXS

+0.16

-2.79

.SSEC

0.43

4.18

India

INR=IN

+0.34

+0.34

.NSEI

0.16

2.54

Indonesia

IDR=

--*

+3.87

.JKSE

--*

-3.17

Malaysia

MYR=

+0.07

-4.56

.KLSE

-0.14

-7.37

Philippines

PHP=

+0.31

-0.91

.PSI

-0.53

-1.88

S.Korea

KRW=KFTC

+0.57

-4.18

.KS11

-0.31

14.87

Singapore

SGD=

+0.01

-0.86

.STI

0.24

-2.61

Taiwan

TWD=TP

+0.16

-0.03

.TWII

-0.42

16.78

Thailand

THB=TH

+0.07

-0.40

.SETI

-0.43

-8.49

* Indonesia markets were closed for a public holiday on June 1


Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

Asian stock markets https://tmsnrt.rs/2zpUAr4


Reporting by Riya Sharma in Bengaluru; Editing by Kim Coghill

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