Asian markets were largely subdued on Wednesday, with currencies and shares both trading slightly weaker as investors look for fresh cues on the future path of interest rates in the US Thailand’s baht and the Singaporean dollar slipped 0.5% and 0.2%, respectively, while the yuan depreciated 0.2%.
The dollar index ticked up 0.2% to 101.90 in Asian trading.
St. Louis Federal Reserve chief James Bullard told Reuters the Fed should continue raising interest rates to subdue persistent inflation.
Atlanta Fed President Raphael Bostic said he expects just one more quarter-point hike, followed by an extended pause.
“The market is currently pricing in the near-certainty of a 25-basis point hike, but there is really a lot of uncertainty about what follows afterwards,” said Alvin Tan, head of Asia foreign exchange strategy at RBC Capital Markets.
Investor uncertainty seeped through share markets as well. Stocks in the region largely declined, with equities in Taipei , Kuala Lumpur and Manila falling 0.4% to 0.6%.
Shares in Shanghai and Hong Kong fell as an uneven economic recovery after China dropped its zero-Covid policy and some contradictory macro data in the first quarter kept investor sentiment weak.
Meanwhile, Thailand’s central bank said it expects average headline inflation of 2.6% over the next 12 months, within its target range of 1% to 3%.
Asia FX, shares weaken as China GDP data fails to lift markets
In March, headline inflation cooled to 2.83%, returning to within the target range for the first time in 15 months.
On Tuesday, Indonesia’s central bank kept interest rates unchanged for a third consecutive meeting, predicting headline inflation would be back within its target sooner and after the rupiah strengthened significantly.
The rupiah is the best-performing currency in Asia this year, rising nearly 5%. Markets in Indonesia were closed on Wednesday.
Emerging markets such as South Korea, Singapore and India also recently paused sustained policy tightening campaigns as growth concerns took precedence over high inflation.
“A combination of the Fed’s imminent pause after May, along with a growing conviction that the US dollar appears to have peaked is giving regional central banks room to turn away from hiking rates and support growth instead,” Tan said.
Highlights
** Malaysia’s March exports fall 1.4% year-on-year
** Thai January-February rice exports up 38% year-on-year at 1.4 millon tonnes - government official
** Indian rupee hits over one-week low
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