Asian Currency

Asian currencies dip on US inflation data, some stocks hit records

(March 13): Most Asian currencies dipped on Wednesday, after hotter-than-expected inflation data in the United States suggested a slight increase in the risk that interest rate cuts may be delayed, although stocks gained, with record highs being touched in Jakarta and Taipei.

The South Korean won fell 0.3%, leading losses in Asia.

The Philippine peso and Taiwan dollar lost 0.2% each, with the former poised for its largest drop in two weeks as it gives back a little bit of recent gains. Phillipine stocks rose 1.3%.

 Consumer prices in the world’s largest economy increased in February, beating consensus forecasts and gently pushing back on rate cut bets.

Futures pricing implies a 67% chance of the Federal Reserve lowering rates in its June meeting, down a tad from 71% earlier in the week, according to the CME FedWatch Tool.

“Prospects of delayed Fed rate cuts mean ‘higher for longer’ imposition on central banks elsewhere, and especially for EMs (including EM Asia), where front-running Fed rate cuts comes at a cost of macro- and FX-stability,” Vishnu Varathan, chief economist Asia ex-Japan at Mizuho Bank, said in a client note.

Varathan added that the inflation print could be felt more acutely outside of the US and this could limit the extent to which Asian emerging market currencies might benefit from an expected retreat by the dollar.

Other emerging Asian currencies such as the Singapore dollar, Indian rupee and the Malaysian ringgit traded between flat and 0.2% lower.

The Indonesian rupiah propped up marginally, after coming off from a public holiday, while the Thai baht followed suit. 

Among Asian equities, Singapore and Jakarta firmed between 0.6% and 0.4%, with Indonesian shares touching a record high, before paring some gains. 

Inflows in the country’s equity benchmark, particularly into financial stocks, and last month’s election victory by Prabowo Subianto, who was seen delivering policy continuity, has improved sentiment.    

South Korean shares touched a 23-month high, rising about 0.4%, driven by a jump in chipmaker Samsung Electronics.

However, markets in Kuala Lumpur and Mumbai fell about 1.1% and 1.2%, respectively.

Taiwan’s tech-heavy shares advanced as much as 1% to hit a new record high, before reversing gains to end flat. Investors have constantly looked to pour their money into artificial intelligence stocks, driven by enthusiasm over the sector.

Elsewhere, Argentina’s monthly inflation slowed down more than expected in February to 13.2%, though the yearly rate was an eye-watering 276.2%. The country’s peso last traded at 848.50 per dollar, while stocks ended over 7% higher overnight.

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