Most emerging Asian currencies were mixed against a choppy greenback on Wednesday, with the South Korean won and Taiwan dollar eking out gains.
Regional stock markets, meanwhile, were buoyed by weak economic data from the United States, which spurred investor bets that central banks may start to slow the price of future interest rate hikes.
The dollar index, which measures the strength of the greenback against a basket of currencies was 110.36 at 0416 GMT. However, the US currency had fallen for five consecutive sessions and is currently hovering below a 20-year peak.
A softer dollar is usually beneficial for risk-sensitive Asian assets.
Moreover, a government survey showed overnight that the US job openings fell to a two-and-a-half-year low, suggesting that aggressive rate hikes have begun to bite into the economy, and the Federal Reserve could tone down its stance on policy tightening, thereby boosting confidence of risky assets.
Investors are now awaiting non-farm payrolls data due on Friday and key inflation data next week for any clues on the Fed’s future tightening stance. Markets are pricing in another 75 basis point hike at its next meeting on Nov.2.
“A sharp fall in job openings yesterday could be viewed as a signal that the labour market is indeed cooling, which would suggest the Fed is winning its battle against inflation,” ING analysts wrote.
Asian currencies dip as inflation, recession woes loom
Back in Asia, the South Korean won was among the lead gainers for the day rising about 0.3%, as the Asian trade bellwether reported a smaller than expected inflation print of 5.6%, even as its central bank said that annual inflation is expected to stay high.
“Considering ongoing won weakness and notwithstanding this week’s rally, these inflation data sets should push the Bank of Korea to hike 50bp at the October 12 meeting,” Stephen Innes from SPI Asset Management said.
Other currencies like the Taiwan dollar Indonesian rupiah and the Malaysian ringgit traded higher between 0.1% and 0.4% .
The Philippines peso however, dropped 0.2%, as inflation accelerated to 6.9%, its fastest pace in four years, pointing at more rate hikes, with the central bank chief saying that it will be ready to take further action to rein in price pressures. Their stocks also lost about 0.4%.
The Thai baht lost ground as well, tracking higher Brent crude prices, even as the tourism-reliant economy reported an easing in consumer inflation for September, which could give cues on how the Bank of Thailand will go about its policy tightening path.
Meanwhile, stock indexes across Indonesia, Malaysia and South Korea firmed between 0.3% and 1%.
Singapore stocks gained about 0.4%, ahead of retail sales data due later in the day.
Markets in China were closed for the week on account of ‘National Day’, while India was on a public holiday.
Highlights:
** Indonesia’s benchmark 10-year yield falls to 7.205%
** Malaysia’s end-Sept palm oil stocks seen hitting near three-year peak
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