BENGALURU: Emerging Asian currencies and most equities in the region rose on Tuesday after the US dollar touched new lows, with investors turning bullish on riskier Asian assets on renewed hopes of a potential end to US interest rate hikes.
The Taiwanese dollar led the charge, rising as much as 0.8% to its highest level since July 31. Stocks in the country, Asia’s second-best performer so far this year, advanced more than 1% and are trading at a near four-month high.
News of Kuomintang and the Taiwan People’s Party’s progress on a joint presidential bid last week pushed the Taiwan dollar to its strongest weekly rally in a year on expectations of easing Taiwan-China tensions if they won, although subsequent disagreements between the two have cast doubts over the coalition.
The Malaysian ringgit, South Korean won, and Chinese yuan added between 0.2% and 0.5%.
Equities in Kuala Lumpur, Mumbai and Bangkok advanced between 0.2% and 0.5%, with stocks in Thailand at their highest level in more than two weeks. Shares in Seoul rose as much as 1.1% to their highest in over eight weeks.
Signs of progress in taming US inflation have driven a recovery in EM assets as investors hope for an end to the cycle of rate hikes that have been policymakers’ main tool for fighting price increases.
The greenback has been nursing losses on the back of increasing bets that US rates have peaked, with rising anticipation of monetary policy easing by the Federal Reserve next year.
The US dollar index, which measures the unit against a basket of six other major currencies, was down 0.2% by 0707 GMT.
Investors are now awaiting the minutes of the Fed’s last meeting later in the day to gauge its next move.
Poon Panchibool, a markets strategist with Krung Thai Bank, said there is a possibility of further demand from foreign investors for EM assets if the weakness in the US dollar continues.
“EM assets should emerge from the bottom and make a rebound in the current quarter, and my bets are that we could continue to recover lost ground going forward into 2024,” Panchibool said, while also flagging a potential recession in the US in the first half of 2024.
Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan is up 7% for November and on course for its biggest monthly gain since January.
In contrast, the Indonesian rupiah reversed early gains, inching 0.1% lower, even as Southeast Asia’s largest economy’s current account deficit narrowed in the third quarter on improved demand for exports.
A Reuters poll showed on Tuesday that 27 of 31 economists expected Bank Indonesia to keep its benchmark key interest rate unchanged at 6% when the central bank’s two-day policy review wraps up on Thursday.
In Argentina, offshore dollar bonds rallied following Javier Milei’s victory as president on Sunday as investors welcomed pledges to cut spending.
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