Most Asian FX rise; inflation data eyed for rates outlook

The Philippines peso and South Korean won gained the most among emerging Asian currencies on Tuesday as the dollar retreated, with investors looking to an inflation reading for clues on the timing of US rate cuts.

Investors are focused on the US personal consumption expenditures reading on Friday during a data-light week. This is likely to set the path for US interest rates, which Asian central banks are expected to follow.

Markets have significantly pared their bets on the number of rate cuts, pricing in 34 basis points of cuts compared with 150 bps at the start of the year, due to resilient economic data from the world’s largest economy.

The push back in the timing of rate cuts has hit sentiment for riskier Asian assets.

At 0355 GMT, the dollar index, which measures the strength of the greenback against six major currencies, fell 0.1% to 104.42.

“Trading FX has been difficult throughout 2023 and 2024.

The constant disconnect between the wishes of Fed officials, the expectation of market participations and the realised US economic data have resulted in the broad dollar to largely remain range-bound between 100-105,“ Bank of America analysts said in a research note.

Asian currencies: Philippine peso drops to over 1-1/2-year low

The Philippine peso and South Korean won led currencies higher, rising 0.4% and 0.6%, respectively.

Other currencies such as the Singapore dollar, Malaysian ringgit and the Taiwan dollar appreciated up to 0.2%.

However, the Indonesian rupiah fell 0.2%, while the Thailand baht traded flat.

Among Asian equities, the Jakarta index advanced as much as 1.8% to 7,308.14 points, while others such as Singapore , and Seoul rose 0.4% and 0.1%.

Taipei stocks hit yet another all-time high, rising as much as 0.5% to 21,917.93 points, piggybacking on bullish sentiment over technology stocks.

However, shares in Kuala Lumpur and Manila fell 0.2% and 0.6%.

Elsewhere, Sri Lanka’s central bank stood pat on interest rates to keep price pressures in check, with the authorities looking to boost growth in the debt-laden nation.