What’s going on here?
Most Asian currencies traded narrowly but were set for monthly gains as investors looked forward to crucial US
inflation
data.
What does this mean?
The Thailand baht and Taiwan dollar are poised for their first monthly gains since the beginning of the year, while the Indonesian rupiah eyes its first rise since February. Indonesia’s central bank is keeping a close watch on the forex market to ensure stability. All eyes are on the upcoming US personal consumption expenditures (PCE) reading – it offers key insights into global
interest
rate trends. Capital Economics analysts noted headline inflation in most of Emerging Asia is just above central bank targets, leading some policymakers to adopt a more hawkish tone. However, they also predict weaker growth will push most central banks to cut interest rates by year’s end.
Why should I care?
For markets: Diverse responses to economic signals.
Investors are also tuning into election results from India, South Africa, and Mexico next week, which could stir up new market
volatility
. Shares in Seoul, Manila, and Singapore rose between 0.1% and 1%, while shares in Jakarta and Taipei fell by 0.7% and 0.9%, respectively. The Jakarta market is facing its worst month in a year, and Philippine stocks are set for their biggest monthly drop since last October.
The bigger picture: Global economic shifts affecting local dynamics.
China’s May manufacturing decline triggered calls for more fiscal stimulus, resulting in a 0.2% drop in Chinese stocks after early gains. Japan’s inflation data has complicated the Bank of Japan’s interest rate decisions, with the government signaling potential action against excessive currency moves. Barclays analysts noted that while US data is awaited, emerging markets are likely to react to localized factors in the short term, given global economic diversity.
