The Philippine peso fell most among emerging Asian currencies against the greenback on Wednesday, while equities were also under pressure ahead of crucial US inflation data that will likely offer more clarity on the timing of rate cuts.
The peso depreciated as much as 0.5% against the US dollar to hit its lowest level since Nov. 3. Data showed the country’s trade balance in November remained in substantial deficit.
The Indonesian rupiah fell as much as 0.4% to its lowest in nearly a month.
Among equities, Singapore stocks retreated as much as 1.1%. They were followed by equities in Manila, which slipped as much as 0.8%.
Traders are awaiting US inflation data, due on Thursday, to assess the timing and size of any Federal Reserve interest rate cuts in 2024.
“A softer (inflation) print should see goldilocks trade returning while USD and UST yields can ease off.
This should help weigh on USD/AxJs,“ said Christopher Wong, an FX strategist at OCBC.
Higher inflation is not ruled out, Wong added, which should see further unwinding of aggressive Fed cut bets.
Expectations that the Fed could be cutting rates as soon as March have been slowly decreasing. Markets are currently pricing in a nearly 68% chance that the Fed could begin easing rates as early as March, the CME FedWatch Tool showed.
Back in Asia, the won slipped as much as 0.5% to its lowest level since Dec. 7, 2023. Stocks in Seoul declined for a sixth straight session, losing as much as 0.8% to hit their lowest level since Dec. 14, 2023.
Most Asian stocks, currencies tick higher; US inflation awaited
The Bank of Korea (BOK) is set to announce its key base rate on Thursday. Economists are expecting the BOK to keep the key policy unchanged until at least Q3 despite some concerns around financial stability, a Reuters poll found.
“While we do not expect BOK to cut rates just yet as inflation pressures remain, a shift towards a neutral stance may imply consolidation for USD/KRW in the short-term,” analysts at DBS wrote.
Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui
Banking Corp, said he sees most central banks in the region standing pat as well, likely in line with the BOK, and think about rate cuts later in the year.
Hence, there would be limited impact on the emerging Asian currencies for now, he said.
The Thai baht slipped 0.4% while equities in Bangkok were flat ahead of a meeting between the country’s Prime Minister Srettha Thavisin and its central bank governor later in the day to discuss a stimulus plan and other matters.
This comes after Srettha, who is also finance minister, urged the central bank earlier this week to consider cutting interest rates to help the economy, with inflation at very low levels.
Meanwhile, the Taiwanese dollar and stocks in Taipei slipped 0.2% each.
Taiwan goes to the polls on Saturday to elect a new president and parliament.
