EMERGING MARKETS – Thai baht drops as rates hang and rupee retreats

    * Thai May consumer prices rise at faster-than-expected pace
    * Malaysia and South Korea markets closed for public holiday
    * Oil prices climb above $120 per barrel 

    By Tejaswi Marthi
    June 6 (Reuters) - Most Asian currencies were mixed on
Monday as markets looked to U.S. inflation data later this week
while the Thai baht fell ahead of a central bank meeting where
rates are likely to stay on hold.
    The Bank of Thailand (BOT) is expected to leave interest
rates unchanged when they meet on Wednesday despite red-hot
inflation, which accelerated at a much faster pace than expected
in May. 
    A Reuters poll found that Thailand's central bank will leave
interest rates unchanged at record lows for the rest of the year
to support economic recovery, despite the consumer price index
rising past the BOT's range of 1% to 3%. [nL4N2XQ0FU] 
    The Thai baht  fell 0.1% after the tourism-reliant
economy's core inflation rose 2.28% for May, slightly higher
than the 2.2% predicted in a Reuters poll. Headline inflation of
7.1% for the same period, however, far exceeded forecast of
5.78%. [nLUN2V200Y]
    "While the baht faces further depreciation pressure from a
worsening real policy rate differential with the Fed, the BOT's
hands remain tied by the still nascent tourism recovery,"
analysts at Mizuho Bank said in a note.      
    Stocks in the region were off to a muted start, with
Indonesia's <.JKSE> slipping 1.5% to lead losses and marking its
worst session in nearly three weeks followed by a 0.4% drop in
Singapore stocks <.STI>. Equities in Philippines and Thailand
also fell.
    In contrast, Japan's Nikkei <.N226> was up 0.7%, underpinned
by a rise in Chinese equities and U.S. stock futures. 
    The rupiah , which rose last Friday after the country
lifted its ban on palm oil shipments, fell 0.2%.  
    Indonesia, the world's biggest palm oil producer, has issued
around 302,000 tonnes of palm oil export permits since the
country restarted exports after halting it for three weeks in
efforts to control soaring prices at home. [nL1N2XT02R]
    Global markets are turning their focus to the U.S. consumer
price report on Friday. Forecasts are for a steep 0.7% rise in
May, though the annual pace is seen holding at 8.3% while core
inflation is seen slowing a little to 5.9%. [MKTS/GLOB]
    "The Fed is set to hike interest rates by 50 basis points at
both its June and July meetings, and probably also in September,
as it looks to bring uncomfortably high inflation back to its 2%
price stability target," analysts at Australia and New Zealand
Banking Group said in a note. 
    Oil prices firmed after Saudi Arabia raised prices sharply
for its crude sales in July, a reflection of how tight supply is
even after OPEC+ agreed to accelerate its output increases over
the next two months. [O/R]
    "OPEC producers have been struggling to increase output even
as curbs have been relaxed and output ceiling has been raised,"
analysts at Mizuho bank wrote, adding, "global energy inflation
is likely to remain worked up by sticky oil prices, which
threatens to amplify pain for EM Asia."  
    ** Top losers on Jakarta SE Composite Index are Gaya Abadi
Sempurna  down 7%, followed by Indah Prakasa Sentosa
 and Bukit Asam  down 6.9% and 6.3%,
    ** China's services activity contracted for a third straight
month in May, pointing to a slow recovery ahead [ZRN004IT9]
    ** Indonesia's 10-year benchmark yields  fell 41
basis points to 6.955%
    ** Singapore's 10-year benchmark yield  fell
marginally to 2.827% 
  Asia stock indexes and currencies                       
 at   0428 GMT                                      
                      DAILY %  YTD %     X   DAILY   YTD %
 Japan            +0.17  -11.9  <.N2    0.70   -2.90
                                   1  25>           
 China                               EC>           
 India          -0.04  -4.28  <.NS   -0.64   -5.05
 Indonesi         -0.21  -1.49  <.JK   -1.56    7.44
 a                                    SE>           
 Philippi         +0.02  -3.59  <.PS   -0.56   -5.88
 nes                                  I>            
 Singapor         +0.09  -1.85  <.ST   -0.13    3.47
 e                                    I>            
 Taiwan         -0.12  -5.89  <.TW    0.52   -8.67
 Thailand       -0.07  -2.84  <.SE   -0.31   -0.91

 (Reporting by Tejaswi Marthi in Bengaluru; Editing by
Jacqueline Wong)
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