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PRAGUE, May 12 (Reuters) – The Czech National Bank (CNB) said on Thursday it had launched currency market interventions after a sizeable depreciation of the crown.

It said the goal was to prevent a longer-term weakening of the crown in a situation of high inflation.

The crown EURCZK= reversed its earlier losses after the news and traded up 0.5% on the day at 25.19 to the euro at 0934 GMT.

(Reporting by Jason Hovet and Robert Muller, editing by Jan Lopatka)

((jason.hovet@thomsonreuters.com;))

Updates to domestic trading close

SHANGHAI, May 12 (Reuters) – China’s yuan ended domestic trade at its lowest level in more than 19 months on Thursday as expectations of aggressive U.S. policy tightening and a flight to safety lifted the dollar, while prolonged COVID lockdowns hobbled the Chinese economy.

The dollar’s climb to a two-decade high followed new data showing surprisingly persistent U.S inflation, raising investor worries that the Federal Reserve may need to accelerate policy tightening to cool prices. nL2N2X315F

That is likely to exacerbate conditions that have contributed to the yuan slipping more than 6% against the dollar since the end of March.

“Markets are wondering how aggressive Fed tightening has to be to curb high inflation. Domestically, COVID and lockdowns are also weighing on the yuan, and the property downturn is another risk,” said Ken Cheung, Asia chief FX strategist at Mizuho Bank.

But Cheung said that the People’s Bank of China (PBOC) seemed reluctant to step in more aggressively, while an index tracking the yuan against a trade-weighted basket .CFSCNYI remains above 100, offering some downside room for the currency.

While traders said a slightly stronger-than-expected yuan fixing on Thursday suggested the PBOC hopes to slow the pace of the yuan’s losses, analysts at Citi said the relatively mild regulatory reaction so far suggests tacit approval of depreciation.

A weaker yuan could potentially help support the country’s export sector and battered small businesses, Citi said.

Before the market open, the PBOC set the yuan’s daily midpoint rate CNY=PBOC at 6.7292 per dollar, firmer than a Reuters forecast of 6.7362 per dollar, but still its weakest since Oct. 16, 2020.

Onshore spot yuan CNY=CFXS opened at 6.7355 per dollar and slipped as low as 6.7919 per dollar, its weakest level since Sept. 30, 2020. It finished its domestic trading session at 6.79 per dollar, its weakest such close in the same time period.

Traders said the sharp drop of more than 650 pips from Wednesday’s late-night close reflected heightened exchange rate volatility as COVID lockdowns contributed to poor market liquidity, with bankers and FX brokers in both Shanghai and Beijing forced to work remotely.

Trading volume CNYSPTVOL=CFXT was about 30% lower on Thursday than in the previous day’s session.

Authorities in Shanghai on Thursday worked to clear the way for an end to a painful six-week COVID lockdown, while Beijing curbed taxi services to keep a lid on its smaller outbreak. nL5N2X408T

The offshore yuan CNH=D3 also weakened sharply, slipping past the psychologically important 6.8 per dollar level to a low of 6.8245, also its weakest since September 2020.

Traders and analysts said that widening spread between the onshore and offshore yuan pointed to solidifying expectations that the onshore currency could fall even more.

“The Chinese economy is set to slow further as the property softness and COVID-induced consumption (weakness) remain the key drag,” Hao Zhou, senior economist at Commerzbank said in a note, noting a weakening bias for the Chinese currency. Faster-than-expected Fed tightening could create further depreciation risks.

The PBOC is likely to opt for easing to prevent a full-blown economic slowdown, but will probably step in to reduce market volatility “when they deem necessary,” he said.

China is considering new incremental policies to prop up growth and will take steps when necessary, a senior official of China’s Communist Party said on Thursday. nB9N2W402E

Zhou forecast a level of 6.70 per dollar for the onshore yuan by the end of 2022, but said he plans to revisit the forecast in coming months.

Offshore one-year non-deliverable forwards contracts (NDFs)CNY1YNDFOR=, considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.8033.

(Reporting by Andrew Galbraith, Jindong Zhang and Winni Zhou; editing by Richard Pullin and Kim Coghill)

((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))

LONDON, May 12 (Reuters) – The dollar rose to fresh two-decade highs on Thursday as concerns that tighter monetary policies to tame surging inflation will hurt the global economy dampened risk sentiment and drove investors into the safe-haven currency.

Data on Wednesday showed U.S. consumer price growth slowed sharply in April, suggesting that inflation had probably peaked, though it was likely to stay hot.

The dollar benefited as the data confirmed expectations for further aggressive hikes in interest rates by the Federal Reserve and investors fretted that central bank tightening could slow global economic growth.

Asian stocks fell to an almost two-year low, European shares tumbled and oil prices were down 2%.

Against this backdrop, the dollar index, which measures the greenback’s strength against a basket of six currencies, rose 0.4% to 104.44, its highest since December 2002.

Despite increasing expectations of a rate hike in July, the euro remained under pressure on fears that the war in Ukraine and rising energy prices could tip the eurozone into recession later this year.

“The market was already priced for this, but we can now have a high level of confidence that the ECB will hike in July,” strategists at MUFG said.

The euro EUR=EBS fell 0.5% to USD 1.0463, after hitting its lowest since January 2017 at USD 1.044.

“The risk sentiment soured further due to the disappointing news regarding China’s Covid situation,” Mizuho strategists said. “Two new infections in Shanghai were reported, which reset the timeline for ending the lockdown.”

Shanghai authorities combed the city on Thursday for its last COVID-19 cases to clear the way for an exit from a painful six-week lockdown.

China’s yuan fell as low as 6.8150 per dollar, its lowest since September 2020, and was last down 0.7% at 6.8125.

The yen rose 1% against the dollar but was not far from its lowest level since April 2002 as hawkish Federal Reserve rhetoric continued to weigh on the Japanese currency.

A Bank of Japan policymaker said it was inappropriate to change monetary policy to control exchange rates, brushing aside the idea of countering sharp yen falls with interest rate hikes.

Bitcoin meanwhile fell to its lowest in 16 months on Thursday, leading a rush out of risk assets, such as tech stocks, while the collapse of TerraUSD, a so-called stablecoin, underscored the strain on cryptocurrency markets.

Bitcoin, the world’s largest cryptocurrency, dropped 3% to USD 27,584, after hitting its lowest since December 2020. It has lost a third of its value in the last eight sessions.

(Reporting by Stefano Rebaudo and Kevin Buckland; Editing by Sam Holmes and Bradley Perrett)

FRANKFURT, May 12 (Reuters) – European Central Bank policymaker Peter Kazimir dropped a hint about a July interest rate increase on social media on Wednesday, joining a growing number of colleagues in calling for a hike to tackle record-high inflation.

“(I am) ready to hike in July — and not just the beautiful Atlas Mountains here in #Morocco,” the Slovak governor wrote on Twitter.

He added he was in the North African country for the annual meeting of the European Bank for Reconstruction and Development (EBRD).

(Reporting By Francesco Canepa; Editing by Toby Chopra)

((@FranCanJourno francesco.canepa@thomsonreuters.com; 004906975651247; Reuters Messaging: francesco.canepa.thomsonreuters.com@reuters.net))

By Anisha Sircar

May 12 (Reuters) – Emerging market currencies slipped on Thursday as the greenback hit its highest level in two decades after hotter U.S. inflation data, while regional shares tumbled to fresh 22-month lows on pressure from stock markets in India and China.

MSCI’s index of emerging market (EM) currencies .MIEM00000CUS resumed a descent that began in early-April, falling 0.6% to return to its weakest level since November 2020 after a breather in its last two sessions.

Inflation pressures in parts of EM are rising, even though U.S. inflation might have peaked, said Natalia Gurushina, EM Fixed Income economist at VanEck.

Data on Wednesday showed U.S. consumer price growth is likely to stay hot for a while. Higher-than-expected inflation lifted the dollar =USD and dragged stocks as it suggests a more robust Federal Reserve response this year. nL2N2X315F

“Some EM central banks will have to keep on hiking – in a sense ‘matching’ the Fed’s hikes – even though EM inflation is driven by exogenous factors, but the problem is that global supply shocks are feeding into core inflation, and this passthrough might be higher than in normal pre-COVID years,” Gurushina added.

Stocks .MSCIEF plunged 2.3% to a 22-month low, dropping eight out of its nine previous sessions.

Indian shares .NSEI, .BSESN dropped nearly 2% and the rupee INR=IN hit an all-time low for a second time this week ahead of domestic retail inflation numbers, with a Reuters poll expecting it to surge to an 18-month high. nL3N2X40XW nL3N2WY21A

China stocks .SSEC, .CSI300 pared gains to close upto 0.4% lower, while the yuan CNY= slipped 0.9% to a 20-month low.

The South African rand ZAR= fell 0.8%, ahead of mining data and after new COVID-19 cases crossed 10,000 for first time since January, stoking fears of a fifth wave. nJ8N2WE008

In Central Europe, the Czech crown EURCZK= bounced 0.2% a day after plumbing two-month lows after Czech Republic President Milos Zeman appointed Ales Michl, a central bank board member who has opposed policy tightening, as the bank’s new governor, signalling a likely end to rate hikes. CEE/

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Anisha Sircar and Lisa Pauline Mattackal in Bengaluru; editing by Uttaresh.V)

((Anisha.Sircar@thomsonreuters.com; Twitter: https://twitter.com/AnishaSircar;))

Adds details on rules and separate comment on the baht

BANGKOK, May 12 (Reuters) – Thailand’s central bank said on Thursday it plans to further relax foreign exchange rules, seeking to help companies more efficiently hedge and manage risks.

The measures would come into effect on Friday and “make overseas transactions easier while simplifying hedging for businesses so there can be more efficient risk management,” ​Assistant Governor Alisara Mahasandana told a virtual briefing.

More measures will come into effect over the next few years, she added.

“We will focus on non-banks by expanding the scope of non-bank FX services and adjusting guidelines for more flexible FX transactions,” she said, noting this would help lower costs.

She said on average such transactions account for 7% of expenses, which is higher than the average in the region.

Separately, Thailand’s central bank said the movement of the baht THB=TH has had limited impact on inflation and the economy, after the currency reached its weakest level for five years against the dollar on Thursday. nL2N2X405R

“The Bank of Thailand is closely monitoring the situation and is ready to take care of the baht if necessary,” Alisara Mahasandana said. nL3N2X4155

(Reporting by Kitiphong Thaichareon and Satawasin Staporncharnchai, and Chayut Setboonsarng; Editing by Martin Petty and Ed Davies)

((chayut.setboonsarng@tr.com, Twitter: @ChayutSet; +66854849033;))