Asian stocks, currencies nudge higher as focus turns to US inflation

• Traders await US PCE data due out later in day
• All Asian currencies set to end 1H in red
• Equities mixed over 1H; Taiwan set for around 29% gain

Asian currencies and stocks gained some ground on Friday and continued to trade in a tight range as caution prevailed ahead of a key U.S. inflation data, after a subdued week of trading impacted by the Federal Reserve’s cautious stance on rate cuts.

The Singapore dollar rose by 0.1%, while the Malaysian ringgit and the Thai baht were largely unchanged.

“While a firm U.S. dollar and domestic (Thai) politics serve as near-term headwinds for the currency, we retain our sanguine outlook for the Thai baht in the later part of this year,” analysts at MUFG said in a client note.

Legal challenges against Thai politicians, including PM Srettha Thavisin, unsettled domestic politics and financial markets, adding uncertainty to Southeast Asia’s second-largest economy.

Traders keenly await the U.S. personal consumption expenditures (PCE) data, due later in the day, for insights into the Federal Reserve’s policy direction, while also preparing for a wave of inflation data expected next week from Indonesia, South Korea, the Philippines, and Thailand to gauge the potential trajectory of regional monetary policies.

The South Korean won was up 0.7% after data showed the country’s central bank sold a net $1.82 billion in the first quarter to arrest the local unit’s decline.

The Taiwan dollar advanced by 0.3% and logged its third straight week of gains.

In the first half of 2024, the baht, the won and Indonesian rupiah , and the Philippine peso faced substantial declines between 5% and 7%, ranking them as some of the weakest currencies in emerging Asian markets.

Conversely, the Indian rupee emerged as the strongest performer in the region, experiencing only a slight depreciation of 0.3% year-to-date, buoyed by improving economic fundamentals and foreign investment inflows.

Equities in the region advanced on Friday, with shares in Jakarta <.JKSE> adding 1.6%, while those in Manila <.PSI>, Seoul <.KS11>, and Taipei <.TWII> were up between 0.3% and 0.6%.

Equities in the first half of 2024 displayed mixed results with South Korean, Malaysian and Indian shares poised to end the half-year with gains of 5.2% to 11.1%, while Taiwan shares surged nearly 28.5%, bolstered by strong performance in chip stocks.

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—Reporting by Roshan Thomas in Bengaluru; Editing by Janane Venkatraman