BENGALURU: Emerging Asian currencies held largely steady on Friday, but were on track to post weekly losses, while regional equities tracked Wall Street higher after a big drop in US retail sales firmed expectations of a June rate cut by the Federal Reserve.
Stocks in Singapore rose as much as 1.7% to hit their highest in more than a month, while Malaysian equities advanced as much as 0.4% to touch a level unseen since June 2022.
Indonesian stocks extended gains, rising as much as 0.9% to their highest in more than a month, and were set for their best week since mid-November.
Unofficial counts showed Defence Minister Prabowo Subianto comfortably winning the country’s hotly contested presidential election in a single round, and investors stayed optimistic about Prabowo’s promise to follow President Joko Widodo’s policies in Southeast Asia’s largest economy.
Stocks in South Korea and India rose 1.3% and 0.7%, respectively. Equities in Taiwan inched lower, but were near a record high reached on Thursday.
Data released overnight showed that US retail sales fell by the most in 10 months in January, relieving some stress about the hotter-than-expected inflation report that came earlier this week.
Traders are now pricing in an 80% chance of a Fed rate cut in June, according to the CME FedWatch tool.
The dollar fell overnight but was steady in early Asia trade. It was on track for its fifth straight weekly gain.
“Weaker retail sales will probably reduce expectations of 1Q GDP growth and should temper fears that the economy may be overheating again. That said, we caution against reading too much into any single data point,” analysts at DBS wrote.
“We still see soft-landing as the most likely scenario and prefer to fade extremes in USD rates movements.”
Currencies in Asia traded in a tight range. The Singapore dollar was flat but set for a sixth straight weekly decline.
The Malaysian ringgit and the Thai baht were both on track for a second consecutive weekly drop. The Philippine peso was largely flat, while stocks gave up early gains and were last down 0.1%.
The Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate steady on Thursday and said that risks to the inflation outlook had receded, but they remained tilted towards the upside and, therefore, warranted caution.
DBS analysts expect the BSP to be mindful of the Fed’s policy direction and its impact on the domestic currency, and don’t see the central bank shifting to a dovish bias. Next week, investors will focus on the Bank of Korea and Bank Indonesia’s policy rate decisions, along with inflation data from Malaysia and Singapore and gross domestic product (GDP) numbers from Thailand.
China markets are set to reopen on Monday after the week-long Lunar New Year holidays and investors will be waiting to see what authorities could do next to shore up the country’s battered stock market after appointing a new markets regulator just before the break.