BENGALURU (Dec 27): Most emerging Asian currencies and equities gained on Wednesday, taking cues from a weaker US dollar and a rally on Wall Street on optimism that the US central bank could begin cutting rates as early as next March.
MSCI’s emerging market currency index rose 0.2% to touch its highest level since April 2022.
MSCI’s emerging market Asia index advanced 0.5%, and was on track to post a yearly gain, snapping a two-year losing streak.
Investors continue to bet that major global central banks, led by the Federal Reserve (Fed), could begin easing rates next year.
The yield advantage that the US has enjoyed for much of 2023 looks set to erode once the Fed starts cutting rates, said KCM Trade analyst Tim Waterer.
“The USD is being shunned by traders and this is allowing emerging market currencies to shine,” Waterer said.
Thailand’s baht strengthened 0.5% to its highest since Aug 3.
The Indonesian rupiah, one of the best-performing currencies in the region this year, rose 0.4% to a near one-month high, while the Taiwanese dollar strengthened 0.6% to its highest since July 14.
Indonesian stocks gained 0.4% to hit their highest level since September 2022, while Taiwanese stocks advanced 0.8% to their highest since March 2022.
Earlier this month, the central banks in Indonesia, Taiwan and the Philippines kept their key interest rates unchanged, although they struck a less dovish tone than the Fed.
However, an easing inflation trend in the region is likely to provide these central banks with some breathing room in terms of rates.
Markets will now be watching closely for South Korea’s industrial output figures and Thailand’s trade data due later in the week.
