Asian Currency

Emerging Markets – Asian currencies stay tepid despite stocks rally; Thai baht falls 0.2%

HANOI (Reuters): Most Asian emerging market equities rose on Tuesday, while currencies were subdued, as investors awaited a series of economic data due this week and the outcome of the U.S. Federal Reserve’s policy meeting. Indonesian stocks led gains in the region, jumping 1.2%.

For the month, however, it is down 0.6% so far, on track to record a second consecutive monthly drop. Among currencies, the Thai baht depreciated 0.2% against the greenback, while the Indonesian rupiah slipped 0.1%.

Markets are awaiting a slew of data this week, including the European inflation and U.S. labour market reports. Investors will also focus on the Fed’s two-day meeting ending on Wednesday at which it is expected to stand pat on interest rates but strike a hawkish tone.

The Fed “will likely reiterate that they are still seeking “greater confidence” that inflation is falling ‘sustainably toward’ the 2% target.

But in reality, recent inflation data has not provided policymakers with the confidence they are seeking,” said Christopher Wong, a currency strategist at OCBC

Investors have dialled back expectations for the timing and magnitude of U.S. rate cuts this year after hotter-than-expected inflation reports, with markets pricing in a 57.9% chance of a rate cut in September, CME FedWatch Tool showed.

Traders are now pricing in 35 basis points of cuts in 2024, drastically lower than the 150 bps of easing priced at the start of the year. In Asia, official surveys showed China’s manufacturing and services activity both expanded at a slower pace in April.

The yuan fell 0.3% while Shanghai stocks slipped 0.1%. The Philippine peso slipped 0.1% while the Singapore dollar fell 0.2%. Shares in Thailand and Singapore jumped 0.6% and 0.2%, respectively. – Reuters

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