Most Asian currencies, stocks slip on Fed rate cut uncertainty

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By Archishma Iyer

April 12 (Reuters) – A buoyant dollar pushed most emerging Asian currencies lower on Friday, with the South Korean won and Malaysian ringgit leading declines, while regional equity markets fell as investors refrained from taking on fresh bets due to uncertainty around the timing of U.S. rate cuts.

The MSCI International Emerging Market Currency Index .MIEM00000CUS slipped about 0.2%, hovering near a two-month low.

A red-hot U.S. inflation print during the week forcedtraders to adjust their rate cut wagers, while Federal Reserve officials said overnight that there was no urgency toease rates.

The dollar index – a measure of the greenback against six major rivals – was at 105.66,as of 0725GMT.

“Although we have been in the bullish USD camp …. it has turned out to be more robust than we expected, especially against Asian currencies,” HSBC said in a note.

Markets are pricing a near 75% possibility of the Fed staying pat on rates at itsJune meeting, sharply rising from a 46.8% chance last week, the CME FedWatch tool showed.

In Asia, the ringgit MYR= fell about0.5%to trade at 4.767 perdollar, its lowest level sincelate February, while the Taiwan dollar TWD=TP, Philippine peso PHP= and the Indian rupee INR=IN traded between 0.1% and 0.2% lower.

Separately, the Singapore dollar SGD= fell about 0.4%to 1.358 perdollar, hittingits lowest since mid-November, and the South Korean won KRW=KFTC slipped about 0.8%. Their equity markets .STI, .KS11 lostabout 0.2%and 0.9%, respectively.

Central banks in both countries kepttheir monetary policies unchanged earlier in the day.

Earlier in the week, the Thai and Philippine central banks had kept their policy rates steady, with the former warding off repeated government pressure to slash rates to shore up the economy.

“The Fed is now in a difficult position, and the market is questioning if there will be any cuts in 2024, suggesting more upside for U.S. rates,” according to analysts fromCiti.

“While EM (emerging markets) central banks can cut rates even with the Fed on hold, a regime of higher U.S. rates is very difficult for EM rates.”

Among other Asian equities, Kuala Lumpur .KLSE,Manila .PSI, Taipei .TWII and Mumbai .NSEI fell between 0.1% and 0.8%.

Meanwhile, adecline in China’s March exports and imports overshot analysts’ expectations, highlighting a frustrating task that policymakers face to boost demand in the economy.

Markets in Bangkok and Jakarta were closed for a public holiday.

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Reporting by Archishma Iyer in Bengaluru; Editing by Jacqueline Wong and Sonia Cheema