Asian currencies head toward multi-month lows as US rate cut bets pushed back

By Archishma Iyer

Jan 31 (Reuters) –Most Asian currencies were headed towards multi-month lows on Wednesday, after bets the U.S. Federal Reserve would not slash interest rates sooner than expected solidified due to resilient economic data from the world’s largest economy.

The Taiwan dollar TWD=TP was poised for its worst month since September 2022, while the Malaysian ringgit MYR= was set for its worst month since May 2023.

The South Korean won KRW=KFTC and the Philippines peso PHP= were on track for their worst month since August last year.

Investors globally have pared back their expectations that the U.S. central bank will cut benchmark policy rates in March, with the first rate cut now forecast to occur at the April 30-May 1 meeting.

Market participants are awaiting the Federal Open Market Committee’s decision later on Wednesday, where the central bank is expected to stand pat on its rates.

“While conditions could be almost optimal for the Fed to start normalizing policy, growth still seems a tad too strong for the Fed start paving the way towards that decision from today,” Maybank analysts wrote.

On the day, the South Korean won and the Taiwan dollar depreciated the most, slipping about 0.4% each, while the Indonesian rupiah IDR= and Thailand’s baht THB=TH slipped about 0.2% and 0.3%.

South Korea and Indonesia are set to reveal inflation data later in the week. Barclays analysts forecast price pressures in both countries to edge lower.

Markets in China .SSEC, CNY=CFXS were weighed down by weak manufacturing activity in the region’s largest economy that reinforced the need for additional stimulus measures to boost growth.

The Philippines peso edged marginally higher and stocks in Manila .PSI rose as much as 1.5% to hit a eight-month high, emerging as one of the best-performing indexes on a year-to-date basis, even as the archipelago nation’s economic growth missed its full-year target after the economy lost some steam in the last quarter of the year.

Analysts from Capital Economics expect resilience in the Philippines’ economy to fade, as credit growth has come off the boil and should feed through to lower domestic demand growth in the coming quarters.

Among other Asian equities, stocks in Bangkok .SETI, Seoul .KS11 and Taipei .TWII fell between 0.3% and 0.7%.

Shares in Jakarta .JKSE and Kuala Lumpur .KLSE were 0.2% higher and flat respectively, even as the latter clocked in a 4% gain on a year-to-date basis.

HIGHLIGHTS:

** Indonesia’s benchmark 10-year bond yield falls to 6.590%

** Indonesia c.bank eyes room for rate cut in H2, focus on stability in 2024 – governor

** Thai December factory output drops 6.27% y/y, more than forecast

Reporting by Archishma Iyer in Bengaluru; Editing by Jamie Freed