Asian currencies, stocks roasted by hot US inflation data
MOST Asian currencies and stocks sold off on Friday, with equities in the Philippines set for their biggest one-day decline in over a year, as hotter-than-expected U.S. inflation data raised concerns over a mid-year U.S. rate cut.
The MSCI International Emerging Market Currency Index fell 0.3%, poised for its worst day in about a month. It is down 0.2% this week, the most since mid-January.
Stocks in Manila sank as much as 2.5%, on pace for their biggest one-day slide since January 2023.
Investors fled riskier assets to take refuge in the safe-haven dollar after U.S. producer prices rose much more than expected that, coming on the heels of sticky consumer prices data earlier, kindled concerns over when the Federal Reserve would start lowering interest rates.
The odds of rate cuts starting in June retreated to 60%, from about 74% earlier, according to the CME FedWatch tool. All eyes will be on the Fed’s meeting next week for further cues on monetary policy.
Traders will also monitor central bank meetings in Japan, Taiwan and Indonesia next week for any clues on where regional interest rates might be headed.
The Bank of Japan is expected to signal a shift from its ultra-easy monetary policy. The dollar index was steady at 103.4 as of 0705 GMT, weighing on multiple emerging Asian currencies.
The South Korean won was the biggest casualty, tumbling 1%. The Taiwan dollar shed around 0.4% in its worst session since early February.
The Indonesian rupiah, Philippines peso and Malaysian ringgit all lost 0.3%, with the ringgit seeing its worst day in a month and poised for its first weekly drop after three weeks.
Indonesia posted a smaller trade surplus in February as imports came in stronger.
Among Asian stocks, Seoul ended 1.9% lower, posting its biggest fall since early February, while Taipei closed down 1.3%, marking its worst day since early January.
Shares in Jakarta, Kuala Lumpur and Bangkok fell between 0.1% and 0.9%.
“A brief “air pocket” for stocks is likely until the March FOMC event risk is out. However, on a multi-month view, we remain modestly constructive on Asian stocks,” analysts from Nomura said in a research note.
Elsewhere, China’s central bank left a key policy rate unchanged as expected.
HIGHLIGHTS:
** Indonesia’s benchmark 10-year yield rises to 6.659%
** Singapore Airlines prices $500 mln 10-year dollar bond, sees strong orders
** Philippine c.bank sees narrower 2024, 2025 current account deficit – Reuters
