BENGALURU: A gauge of emerging Asian equities and currencies declined on Wednesday, as investors awaited US inflation data for insights on the Federal Reserve’s rate cut and policy cues from China’s annual economic meeting.
Attention is on the US inflation report, due later in the day, which will offer insights into the Federal Reserve’s rate-cut path ahead of its policy meeting later this month.
An in-line inflation reading is unlikely to move the market significantly, but if headline and core inflation exceed expectations, it would be negative for emerging market currencies, said Poon Panichpibool, a markets strategist at Krung Thai Bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.6%. Shares in the Philippines were down 1.2% while those in Singapore fell 0.5%.
Meanwhile, MSCI’s emerging market currency index slipped 0.2%, with the Philippine peso and the Indonesian rupiah declining 0.4% each.
Investors also await more detailed measures from China’s annual Central Economic Work Conference this week, after the world’s second-largest economy pledged to ease its monetary policy to boost consumption.
“Should the Chinese authority uplift optimism over economic growth and incoming stimulus, I think it could boost Chinese equities and Chinese yuan in the near term,” Panichpibool said.
“With stronger Chinese yuan, it is possible to see some positive effect towards other EM Asia FXs as well.”
Chinese equities climbed 0.3%, while the yuan declined 0.2%.
However, Panichpibool cautioned that the trend of stronger EM Asian currencies won’t last long and could reverse course whenever the second Trump government decide to deliver tariff hikes as promised.
Data on Tuesday signalled that exports from China slowed sharply and imports unexpectedly shrank in November, pointing towards economic weakness in the region’s top trading partner amid threats of fresh US tariffs.
Shares in South Korea closed 1% higher, extending gains to a second consecutive day, after both stocks and the won came under pressure due to political uncertainty following the failed impeachment attempt on President against President Yoon Suk Yeol. The won edged higher on Wednesday.
“We expect short-term pressures on KRW (the won) to remain,” analysts at Maybank said in a note.
Elsewhere, the Taiwanese dollar weakened 0.2% while shares retreated 1.0%.
Taiwan’s defence ministry reported a spike in Chinese military activity around the island, including 53 military aircraft, with the country on high alert over Beijing’s latest pressure campaign.
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