Most Asian currencies inched higher on Thursday, led by the Philippine peso and Indian rupee after a heavy sell-off in the previous session, while a string of robust US data and hawkish comments from Federal Reserve Chair Jerome Powell limited gains.
The peso strengthened 0.4% eyeing its best day since Mar. 3, while the rupee appreciated 0.2% after losing just as much in the previous session. Two dull spots, the South Korean won and Chinese yuan weakened by 0.1% and 0.2%, respectively.
The Malaysian ringgit was largely unchanged after the country’s central bank kept its benchmark interest rate at 2.75% in a widely expected move.
“In the near term, ringgit remains subjected to some downward pressure due to USD strength, higher rates for a longer while, and also some push-back in China reopening optimism and disappointment with government’s 5% growth target,” Christopher Wong, currency strategist with OCBC said.
Bank Negara Malaysia’s (BNM) policy stance has been in line with that of other Asian central banks, such as the Bank of Thailand and the Reserve Bank of India, which raised interest rates only modestly in this cycle and are expected to hike once more before pausing.
Frances Cheung, a rates strategist at OCBC said that the current view remains that BNM’s decision represents a pause, and not an end to the tightening cycle.
“We hold onto our expectation for a 25bp (basis point) hike at the May MPC (Monetary Policy Committee) meeting,” Cheung added.
Separately, former Malaysian Prime Minister Muhyiddin Yassin was summoned to appear at the country’s anti-graft agency on Thursday following allegations of abuse in stimulus programmes launched under his premiership.
Most Asian currencies largely subdued ahead of Powell’s testimony
Fed’s Powell, on his second day of testimony to Congress, reiterated his message that higher and potentially faster interest rate hikes will be needed to reign in sticky inflation.
But he flagged that policy decisions would be data-dependent in the run up to the Fed’s next policy meeting in two weeks.
Data on Wednesday showed, US job openings remain elevated, private payrolls beat consensus estimates, and demand for home loans increased despite the ongoing upward trajectory of mortgage rates.
Most equities across Southeast Asia, tumbled as Powell’s remarks kept risk appetite in check.
Stocks in Manila, Kuala Lumpur, and Seoul all slipped between 0.2% and 1.6%. Shares in China and India retreated 0.2% and 0.5%, respectively.
Equities in Indonesia and Thailand, however, added 0.5% and 0.1%, respectively.
Highlights:
** Indonesian 10-year benchmark yields rise 4.5 basis points to 7.039%
** Investors turn more bearish on Asian FX amid return of King Dollar- Reuters poll
** China’s financial regulatory revamp raises hope, some concern over control
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