Most Asian currencies were subdued on Friday, and were on track to end the first week of 2024 lower as a rally fuelled by an unexpectedly dovish shift from the US Federal Reserve towards the end of last year stalled.
The Malaysian ringgit and the South Korean won lost 0.3% each, and were both on track to post their worst weekly decline since August last year.
Indonesia’s rupiah and Singapore’s dollar were on course to post their first weekly fall in four.
Traders have dialled back rate cut bets, with markets now pricing in a 65% chance of a rate cut in March, compared to 86% chance a week earlier, according to the CME FedWatch tool.
This has pushed the greenback to post its strongest week since July.
“For the short term, the market is just going to consolidate a little bit ahead of the nonfarm payrolls to assess the data,” said Christopher Wong, FX strategist at OCBC.
Back in Asia, inflation in the Philippines slowed to its weakest pace in nearly two years in December, in-line with the regional trend.
However, full-year readings remained outside the central bank’s target zone, diminishing chances of near-term rate cuts and the Bangko Sentral ng Pilipinas (BSP) maintained its stance that policy settings would stay “sufficiently tight”.
The peso fell 0.2% on Friday and was set for its worst week since late-August. Stocks stood at their highest level since August.
“Today’s reading was within the BSP’s monthly inflation forecast range of 3.6% to 4.4%. Going forward, we expect inflation to ease in Q1 due to a favorable base from last year, before increasing again in Q2,” analysts at Goldman Sachs said.
“We continue to expect BSP to keep its policy rate unchanged at 6.50% until Q3 2024.”
In Thailand, headline consumer price index (CPI) also dropped in December from a year earlier, and was the lowest in 34 months. The baht inched 0.2% lower on Friday and was set for its worst weekly fall since early-October.
The Taiwanese dollar was largely unchanged ahead of the country’s inflation reading later in the day, but was heading for its worst week since August.
Meanwhile, a Reuters poll found that most emerging-market currencies are set to regain their recent strength later this year as expectations of interest-rate cuts by the Fed may keep the dollar in check.
Equities in the region were largely mixed, with shares in Jakarta rising as much as 0.6%, to record high level.
They were also on track for their tenth straight weekly gain.
Stocks in Thailand and South Korea were down 0.3% and 0.4%, respectively.
Stocks Malaysia rose 0.4% to their highest level in nearly 11 months.
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