Asian currencies inched higher on Thursday after data showed U.S. consumer prices in April rose at a slightly slower-than-expected pace, suggesting the Federal Reserve is succeeding in taming high inflation.
Regional stock markets were largely mixed, however.
Figures from the Labor Department showed U.S. consumer prices in April rising 4.9% from a year ago, compared with expectations of a 5% increase, potentially providing cover for the central bank to pause further interest rate hikes.
“In our view, this is an encouraging print for the Fed. This report should keep the Fed comfortable with a hold in June,” analysts at Bank of America said in a note.
Hopes of an imminent Fed pause improved risk sentiment in Asian markets and pushed the South Korean won and Malaysian ringgit up 0.2% and 0.1%, respectively.
Money markets are currently pricing in a 99.7% chance that the Fed will keep rates on hold at its next meeting in June, and expect rate cuts to begin in July through to the end of the year.
Bucking the trend, Thai investors grew cautious ahead of the country’s general election on Sunday, with the Thai baht weakening 0.3%.
Earlier this week, an announcement by Thai billionaire Thaksin Shinawatra - the country’s first democratically elected prime minister to serve a full term - about plans to return to the country after 17 years caused a stir among voters with implications for the vote and the inevitable horse-trading afterwards to form a government, analysts say.
Equities and currencies in China and Hong Kong lost ground after the world’s second-largest economy reported consumer prices rose at a slower pace and missed expectations in April, while factory gate deflation deepened.
The data on Thursday echoed a similarly disappointing official PMI and reflects the unevenness of China’s post-COVID economic recovery, suggesting more stimulus may be needed to boost the economic rebound.
The Shanghai SE Composite Index fell 0.2%, while the Hong Kong benchmark index was off 0.4% while the yuan depreciated 0.1%.
Meanwhile, Indonesia’s stock market fell 1.2%, with broad-based losses in energy, consumer goods, and financials.
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