Most Asian currencies and equities advanced on Friday ahead of crucial US jobs data and growing optimism over US rate cuts later this year, with equities in Taiwan heading for their best weekly performance for the year.
Optimism over artificial intelligence-linked stocks which swept global markets recently helped Taiwan stocks surge 4.5% this week and hit record highs, in what could be its best week since Nov. 2022. Equities in South Korea climbed more than 1% for the week, heading for its best week since Feb. 16.
MSCI’s gauge of emerging market currencies rose up to 0.2% to hit highest level since early January.
Prospects of the start of a rate easing cycle by the US Federal Reserve firmed after Fed Chair Jerome Powell on Wednesday said that rate reductions will “likely be appropriate” later this year.
Powell said on Thursday that the US central bank is “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates.
“The Fed was very careful saying that while they are not in a rush to cut interest rates, the rate cut is still on the agenda. That was quite reassuring for the market,” Sim Moh Siong, FX strategist at Bank of Singapore said.
Investors now await US nonfarm payrolls report due later on Friday for further clues on the US rate outlook.
The improved risk sentiment following the comments helped Asian currencies post broad gains with the South Korean won climbing 0.5% while the Indonesian rupiah rose 0.3%.
For the week, the Singapore dollar rose 0.9% and was headed for its best week since Nov. 17, 2023.
The Philippine peso was on track for it best week since Feb. 2.
The Malaysian ringgit advanced 0.3% to hit its highest level since Jan. 16 for the day, while equities edged 0.1% higher.
The Bank Negara Malaysia (BNM) stood steady on interest rates for a fifth straight meeting on Thursday where it reiterated that the currency was undervalued and did not reflect Malaysia’s positive economic fundamentals and prospects.
“BNM will remain a steady pair of hands for the rest of 2024, in our view. We expect no changes to the policy rate, at 3%, while BNM remains mindful of external (specifically currency) developments,” Lavanya Venkateswaran, a senior ASEAN economist at OCBC wrote.
Markets now await inflation data from China on March 9 and from India next week.
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