Asian stocks, FX climb on US rate outlook ahead of payrolls data

• South Korean stocks hit highest since Jan 2022
• Taiwan stocks climb to record high
• Inflation data from Taiwan, Thailand due later in the day

Most Asian currencies inched higher on Friday versus a weaker dollar, while stock markets were set for weekly gains as soft U.S. labor market data buoyed expectations of interest rate cuts by the Federal Reserve later this year.

The South Korean won strengthened 0.2% and the Singapore dollar inched 0.1% higher.

Both the Indonesian rupiah and the Taiwanese dollar edged up 0.1%.

The Philippine peso was largely flat after data showed the country’s annual inflation eased in June for the first time in five months.

“Today’s print gives us more confidence that the Bangko Sentral ng Pilipinas (BSP) will likely start easing from August,” Barclays analysts said.

The peso would be a key factor to watch when gauging whether or not the BSP has the ability to ease rates ahead of the U.S. Fed, without spurring unwanted currency depreciation, analysts at ING said.

Market focus will shift to inflation prints from Taiwan and Thailand later in the day, though Bank of Thailand Chief Sethaput Suthiwartnarueput said there is no need to cut interest rates despite the country’s slow economic recovery.

The government has been at loggerheads with the central bank for months over interest rates, with Thailand Prime Minister Srettha Thavisin calling for a rate cut to kick-start the economy.

The baht was 0.1% higher, but has fallen 7.2% so far this year, while Thai stocks <.SETI> have lost nearly 8% in 2024.

Most equities in the region were trading higher amid the prospect of U.S. rate cuts for September. Investors now await payrolls data, due later in the day, to further assess the rate outlook.

Traders are now pricing in a 73% chance of a cut in September, up from about 66% a week earlier, according to the CME’s FedWatch tool.

South Korean stocks <.KS11> led the gains amid emerging Asian equities, rising as much as 1.7% to their highest levels since January 2022.

The benchmark index was lifted by upbeat performance in Samsung Electronics<005930.KS> after the multi-national electronics company estimated a more than 15-fold rise in its second-quarter operating profit.

Stocks in Indonesia <.JKSE> gained 0.8% and were set for a 2.7% weekly rise, while Taiwan equities climbed 0.5% to scale a record high.

Manila shares <.PSI> were up 0.4% after the release of the inflation data, while Singapore stocks <.STI> fell nearly 1%, but poised for their best weekly gain since April 22.

READ: Philippine inflation slows in June, boosts chances of Q3 rate cut

Traders will be on the lookout next week for policy rate decisions in South Korea and Malaysia, as well as China’s June inflation print and Singapore’s first-quarter economic growth estimates.

HIGHLIGHTS:

** Japan household spending unexpectedly falls, clouds BOJ rate path

** China’s central bank has hundreds of billions of yuan of bonds at its disposal to cool long rally

** Indonesia budget committee to give widest room possible to next government

—Reporting by Ayushman Ojha in Bengaluru; Editing by Sherry Jacob-Phillips