BENGALURU: Most emerging Asian currencies and equities posted modest gains on Thursday, with the South Korean won leading gains, as traders keenly awaited US inflation data for clues on the Federal Reserve’s timeline on monetary policy easing.
The won appreciated as much as 0.6% against the US dollar, while stocks in Seoul edged higher, after the South Korean central bank kept its benchmark rate unchanged and hinted it might pivot towards easing along with its global peers.
“The Bank of Korea (BOK) is not in any hurry to cut rates, but rising default risks and the potential damage to financial markets may eventually force their hand,” Min Joo Kang, a senior economist at ING said.
Broader market sentiment was buoyed ahead of key US inflation data for December due later in the day, where a soft print could lift rate cut bets for March. Currently, the CME’s FedWatch Tool is showing a 66% chance of a cut.
“An upside surprise to the CPI could lift the US dollar as well as US Treasury yields but we reckon bullish reversals will not last very long,” analysts at Maybank wrote.
While the market continues to expect 150 basis points (bps) of cuts by the Fed by December-end, Maybank analysts remain cautious about some fine-tuning of these expectations as the path towards lower inflation may still be bumpy in the coming months.
A dovish tilt by the US Federal Reserve provides a respite to Asian central banks, with a downward trend in local inflation allowing them to begin considering their respective rate cut trajectories.
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