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EMERGING MARKETS-Asia's currencies rise with U.S. inflation concerns out of the way

·3-min read

* Indonesia 10-year bond yields hit lowest level since Feb 17 * U.S. inflation posts biggest y/y rise in 12 years * Fed, BoJ, Bank Indonesia policy meetings next week By Nikhil Nainan June 11 (Reuters) - Indonesia's rupiah led gains across Asia's risk-sensitive currencies on Friday, with bond yields at four-month lows, after U.S. inflation data was enough to convince investors price rises may be transitory and not affect U.S. monetary stimulus for now. South Korea's won and Taiwan's dollar also gained around 0.4% as the greenback nursed small losses on the back of the inflation report that had kept traders in Asia on their toes all week, looking for any signal that it may prompt the Federal Reserve to discuss early tapering. The overnight data showed U.S. consumer prices up 5% year-on-year, the sharpest rise in 12-years. But hefty contributions to that from short-term rises in airline ticket prices and used cars raised questions about how long the jump might last. U.S. Treasury yields fell to lows not seen since early March, with traders saying short-covering was driving the rally. "With the global market backdrop turning more constructive for bond investments, investors may re-focus on yield differentials," OCBC Bank analysts said in a note. Asia's emerging market currencies and bonds traditionally yield more than their peers in developed markets, though are considered riskier. The yield on Indonesia's 10-year bonds, which offer some of the highest returns in emerging markets, fell to 6.324%, the lowest level since mid-February. Stocks markets in the region also largely gained, with South Korea and Thailand leading the way with a rise of half a percent. In a sign of confidence, the Thai central bank has allowed banks to pay interim dividends, saying they have sufficient capital to deal with the impact of COVID-19 outbreaks. The country's top banks were up around 1%. In Singapore, shares were flat and the local dollar marginally higher. The city-state on Thursday announced a phased easing of its COVID-19 restrictions from next week with expectations for a reopening largely factored in already. Analysts think the bank-and-landlord-heavy Singapore benchmark has further to rise. "I think in the Singapore market, there are still pockets of opportunities to buy into some of these sectors which have not done as well as, and not priced as much of the optimism," said Carmen Lee, Head of OCBC Investment Research. Lee added that the financial sector has done well, but has more upside. With U.S. inflation data out of the way, eyes will now turn to the Fed's policy meeting next week, which will happen alongside local meetings by Indonesia, Taiwan and Japan. HIGHLIGHT: ** Thailand's 10-year government bond yields fell 2 basis points to 1.67% ** S.Korea to begin normalising monetary policy when economy sustains recovery - central bank Asia stock indexes and currencies at 0356 GMT COUNTRY FX RIC FX FX INDEX STOCKS STOCKS DAILY % YTD % DAILY % YTD % Japan -0.07 -5.62 -0.02 5.49 China +0.09 +2.22 -0.25 3.71 India +0.00 +0.02 0.37 12.98 Indonesia +0.39 -1.06 -0.05 2.10 Malaysia +0.16 -2.24 -0.27 -3.17 Philippines +0.06 +0.67 0.09 -3.61 S.Korea +0.42 -2.24 0.55 12.84 Singapore +0.12 -0.07 0.02 11.23 Taiwan +0.39 +3.22 0.39 16.93 Thailand +0.29 -3.60 0.52 12.72 (Reporting by Nikhil Kurian Nainan in Bengaluru and Chen Lin in Singapore; Editing by Kenneth Maxwell)