The Indonesian rupiah emerged as the top gainer among Southeast Asian currencies on Thursday after a cooler-than-anticipated U.S inflation print fanned expectations that the Federal Reserve was near the end of its rate hike cycle.
The rupiah advanced for the fourth straight session, gaining 0.5% and hitting its highest level since Aug. 26. The South Korean won appreciated 1%, while the Malaysian ringgit was up 0.2%.
Consumer prices in the world’s largest economy barely rose in March as the cost of gasoline declined, although stubbornly high rents kept underlying inflation pressures simmering.
“Regardless, with housing prices starting to turn lower, in line with recent rental trends, the March report indicates progress in disinflation for the US,” Maybank analysts wrote in a note.
Bucking the trend, the Philippine peso edged lower after the central bank said it could pause its interest rate- hiking cycle at its meeting next month as inflation eased.
The country has raised rates by 425 basis points since last year to 6.25%.
“This may also be weighing on the currency as the projected interest rate differential could narrow should the Fed hike in May while the BSP opts to pause,” said Nicholas Mapa, senior economist at ING, referring to Bangko Sentral ng Pilipinas (BSP).
The Reserve Bank of India is expected to follow suit and is likely to extend a rate pause through year-end, according to a Reuters poll.
The Indian rupee rose 0.1%, climbing for the second consecutive session. The country’s retail inflation rose at the slowest annual pace in nearly 15 months in March, with the 5.66% gain lower than the central bank’s upper tolerance level for the first time this year.
Inflation is likely to slip below 5% in April, making the bar for another rate hike high, Barclays analysts said.
Most Asian currencies inch lower on odds of Fed rate hike
Stocks across the region followed Wall Street lower, with the benchmark in Manila leading the losses to dip to its lowest since March 20. Equities in Taiwan and Jakarta lost more than 0.3% each.
Highlights
** Sovereign debtors, creditors agree on steps to jumpstart debt restructurings
** Indonesian 10-year benchmark yields are up 0.4 basis points at 6.643%
** Japan, France and India to launch platform to coordinate Sri Lanka debt
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