Most Asian FX gain, interest rate outlook eyed

BENGALURU: Most Asian currencies and stocks started the week on a positive note, with the South Korean won and the Taiwan dollar leading gains, while investors awaited further cues on global interest rate outlooks.

Markets in the United States and United Kingdom were closed because of a public holiday.

Friday’s US personal consumption expenditures reading will be crucial for investors, which will give them an idea of whether the Federal Reserve will be in a position to lower borrowing costs.

So far, most Asian central banks have maintained cautious stances, waiting for the U.S central bank to make its first move, thought it seems unlikely that the Fed will cut rates anytime soon.

Traders are pricing in 50% chance of a rate cut in September with markets anticipating 33 basis points of cuts this year.

Last week, central banks in Indonesia and South Korea kept policy rates unchanged.

“Assuming the US may not act anytime soon, then Europe will probably act first, I think for a lot of central banks especially in Asia, capital outflows can be a problem if the yield differentials remain wide,” Gary Ng, a senior economist from Natixis said.

The dollar index, which measures the strength of the greenback against six major rivals, was marginally lower at 104.70 at 0355 GMT.

“Since USD outperformance is likely to resume, the relief on EM FX may only be temporary. Amid this flux, central banks in the region remain in a wait-and-see mode, keeping policy rates unchanged,” Barclays analysts wrote.

In Asia, the South Korean won and the Taiwan dollar were the top gainers for the day, rising about 0.3% and 0.2%.

Other currencies such as the Malaysian ringgit, Philippine peso, Thailand baht and the Singapore dollar traded between flat and 0.2% higher.

The Indonesian rupiah, however, emerged as the sole outlier, dropping around 0.4%.

Among Asian stocks, Kuala Lumpur, Singapore and Seoul rose between 0.1% and 0.6%, while those in Manila and Jakarta slipped 0.7% and 0.1%, respectively.

Taipei stocks hit a record high, rising as much as 1.4% to 21,871.34 points, after a rally in artificial-intelligence-related stocks in the United States spearheaded by chip giant Nvidia. The stock index is currently up 21.7% on a year-to-date basis, emerging as the best performer in Asia Pacific.

In China, official data showed industrial profits in Asia’s largest economy in the first four months of 2024 rose 4.3% from the same period last year.