Most Asian currencies and stocks steadied on Wednesday after the greenback fell for a second straight day, as investors turned focus to the US Federal Reserve policy meeting for cues on future rate hikes.
The Singapore dollar climbed 0.2%. The Thai baht edged up 0.1%. The Indian rupee and the Malaysian ringgit were flat.
The world’s largest central bank is widely expected to hike its benchmark overnight interest rate by 75 basis points on Wednesday. But for the December meeting, Fed funds futures are split on the odds of a 75 or 50-basis points increase.
“Shrugging off a fourth 75bps hike, merely on the prospects of slower pace of hikes seems like a leap too far from caution to hope to optimism dissociated from policy realities,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
However, a survey showed US job openings unexpectedly rose in September, suggesting that demand for labour remains strong.
That lifted market bets that interest rates will top 5% next year.
Some stocks in the region made cautious gains, despite overnight losses on Wall Street, ahead of the Fed meeting outcome.
Equities in the Philippines climbed 0.3% and Taiwan benchmark advanced 0.5%. However, Singapore stocks fell 0.2%. The Indonesian benchmark inched lower as well.
Asian currencies dip as inflation, recession woes loom
“With the muted moves in the US equity futures this morning, sentiment in the Asia session could largely hold on to some wait-and-see as well, but eyes will remain on Chinese equities after its stellar performance on Tuesday,” said Yeap Jun Rong, market strategist at IG.
Beaten-down China stocks jumped on Tuesday after an unverified note circulating on social media stated that the world’s second largest economy was planning a reopening from strict COVID curbs in March 2023. The market saw further modest gains on Wednesday.
The post-COVID reopening optimism lifted Chinese stocks up 1.6% on Wednesday as well.
“Despite new lockdowns being announced, believing it is still a lengthy work in progress, a China reopening is the biggest ticket in town, and it’s better to show up early,” said Stephen Innes, managing partner at SPI Asset Management.
“Any further positive developments on that front should be the paramount local driver in Asia FX and the yuan especially,” SPI’s Innes said.
Highlights:
** Indonesian 10-year benchmark yields fell 3.5 basis points to 7.505%
** Thailand’s central bank expects the country’s economy to grow 3.3% this year, its deputy central bank governor said
** China’s central bank governor said that the yuan will remain stable against a basket of currencies, as the unit held near 15-year lows to the dollar.
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