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Asian currencies tepid as investors stay wary of possible Fed hikes

Tan KW
Publish date: Fri, 24 Mar 2023, 02:46 PM
Tan KW
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Most Asian currencies were subdued on Friday (March 24), while Indonesian rupiah opened higher after two-day hiatus, as investors remained unnerved on US Federal Reserve's mixed comments on future rate hikes, amid recent banking turmoil.

The Thai baht and the Malaysian ringgit depreciated 0.2% each for the day, but both were on track for their second week of gains. The Indonesian rupiah hit its highest level since early February after a two-day break.

Malaysia's consumer price index for February rose 3.7%, which was faster than expected.

The Philippine peso was heading for a 0.7% weekly gain but remained unmoved for the session, while the South Korean won depreciated by about 1%.

Weighing on emerging markets, strong US jobs data indicated that the world's largest economy remained healthy amid recent financial market turbulence, raising bets that the Federal Reserve might eye two more interest rate hikes this year.

"We see Asia as a safe haven amid the current turbulence, thanks to an absence of material macroeconomic or financial imbalances, which should help the region outperform," said ANZ analysts.

After the Fed's 25 basis points (bps) hike this week, markets are pricing in around 80 bps of cuts by year-end.

Fund flows to Asia would be encouraged by that prospective fall in US interest rates and by Asia's favourable growth differential with the US and the boost from China emerging from pandemic controls, the ANZ analysts added.

Similarly, investors are also seen turning less bearish on most Asian emerging currencies as major central banks looked to pause policy tightening amid fear of a larger banking crisis.

Seeing inflationary concerns, Taiwan's central bank in a surprise move raised its policy rate by 12.5 bps, its fifth rate hike since a tightening cycle began in March 2022.

The Taiwan dollar remained steady while the benchmark stock index inched higher.

Singapore is due to release industrial production figures for February later on Friday.

"We expect another month of contraction in February, mirroring the struggles in non-oil domestic exports (NODX) as global demand remains soft," analysts at ING wrote in a note to clients. "We could see industrial production stay weak in the near term and weigh on Singapore's growth prospects."

Equities in Asia took mixed positions, with stocks in Jakarta rising more than 1% while Malaysian benchmark dipped 0.5%.


  - Reuters


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