Most Asian currencies and stocks stumbled on Friday, with the South Korean won and equities depreciating the most, as risk sentiment took a hit after hotter-than-expected price pressures raised concerns over how soon the US Federal Reserve will start cutting rates.
The MSCI International Emerging Market Currency Index fell 0.3%, poised for its worst day in a month, and was also headed for its worst week since mid-January.
Investors fled riskier assets to take refuge in the safe-haven dollar after producer prices rose much more than expected which added to sticky consumer inflation data earlier, prompting doubts on when the world’s largest central bank could start slashing interest rates.
The Federal Open Market Committee is set to meet next week, and is widely expected to keep rates on hold.
Markets are currently pricing in around a 60% chance of the Fed cutting rates in its June meeting, down from about 74% earlier, according to the CME FedWatch tool.
Separately, traders will also be closely watching central bank meetings in Japan, Taiwan and Indonesia next week, for any clues on where regional interest rates might be headed.
Asian currencies dip on US inflation data, some stocks hit records
Traders are expecting the Bank of Japan to exit its ultra-easy stimulus at the end of its two-meeting meeting next Tuesday.
The dollar index - a measure of the greenback against six major rivals - was at 103.44 at 0425 GMT.
That pushed multiple emerging Asian currencies lower, with the South Korean won suffering the sharpest losses, dropping around as much as 1% to 1,330.30 per dollar.
The Taiwan dollar shed around 0.4%, poised for its worst session since early February, while other currencies such as the Philippines peso and the Thailand baht dropped 0.4% and 0.2%.
The Indonesian rupiah was down 0.3%. The country posted a smaller trade surplus in February as imports came in stronger.
The Malaysian ringgit also lost 0.3%, seeing its worst day since mid-February and was also poised for its first drop after three weeks.
Among Asian stocks, South Korea fell as much as 1.5%, set for its worst day since mid-February, while Philippine stocks slumped 1.4%, set for their worst day since early October.
Shares in Indonesia, Malaysia and Taiwan fell between 0.3% and 0.7%.
“A brief ‘air pocket’ for stocks is likely until the March FOMC event risk is out. However, on a multi-month view, we remain modestly constructive on Asian stocks,” analysts from Nomura said in a research note.
Elsewhere, China’s central bank left a key policy rate unchanged as expected.
Comments