ASIAN emerging market currencies rose on Wednesday on the back of a weaker dollar, while Wall Street’s rise rubbed off on regional stock markets, which were led by Taiwan and South Korea.
The broad MSCI emerging markets currency index was up 0.2%. The index posted gains in the past two days after steep losses last week.
The U.S. dollar softened as data showed U.S. business activity cooling in April to a four-month low, while rates of inflation eased slightly, suggesting some leeway for the Federal Reserve on the interest rates front.
The South Korean won appreciated 0.8%, while the Philippine peso gained 0.4% after eight consecutive sessions of declines.
The Indonesian rupiah advanced 0.4%, ahead of a policy rate decision due later in the day, where expectations are for Bank Indonesia (BI) to leave its seven-day repo rate on hold at 6.00%, with an outside chance of a quarter point hike, according to a Reuters poll.
“Despite the expected pause, we could get a more hawkish statement from BI Governor Warjiyo. BI will likely show willingness to hike further if necessary but we expect Warjiyo to highlight efforts to support the currency via their presence in the spot market,” ING economists said in a note.
The rupiah had hit a four-year low last week, after which the central bank on Friday intervened in forex markets “more boldly to maintain market confidence”.
Stocks in the region continued their bullish run this week, with a 2.7% jump in Taiwan and 2.1% rise in South Korea.
Wall Street closed higher overnight as investors digested company earnings. Shares of EV maker Tesla soared in after-hours trade following its promise of new models.
In the Philippines, shares were up as much as 1.2%, while stocks in Indonesia added as much as 1.1%. Singapore stocks rose as much as 0.9% to their highest level since August 2023.
Globally, market participants are awaiting later this week U.S. first-quarter gross domestic product data on Thursday and personal consumption price expenditures (PCE) index, the Fed’s preferred measure of inflation, on Friday, to further assess the rate outlook.
Markets currently price in a 73% chance of a first rate cut by September, according to the CME’s FedWatch tool.
In Asia, Malaysia is set to report its March inflation data on Thursday. The headline number is expected at 2.0% year-on-year, according to a Reuters poll, compared to 1.8% in February. If so, it would be the highest since August 2023. The Malaysian ringgit inched 0.1% higher, while shares were 0.6% higher.
The Vietnamese dong was largely unchanged, after edging 0.1% higher on Tuesday, but was still near its lowest level on record touched last week.
HIGHLIGHTS:
** Thai c.bank minutes show economy expanding, uncertainty remains
** Unemployment biggest worry in India, world’s fastest growing economy
** Philippines’ budget deficit at $3.41 bln in March – Reuters