Asian currencies trended higher on Wednesday, with the Philippine peso among the top gainers, after a largely on target US inflation print reinforced hope of less aggressive rate hikes, while China retail sales swung back to growth.

The Philippine peso appreciated 0.4%, while Malaysian ringgit strengthened 0.2% making five straight days of gains, while Indonesian rupiah edged higher.

US consumer price inflation cooled slightly in February, largely in line with market expectations, however, sticky rent prices kept inflation elevated, posing a dilemma for the Federal Reserve to either push ahead with rate hikes or announce a pause.

Interest rate future pricing, however, implies an 80% chance of a 25 basis point (bp) US rate hike, which is a lot more dovish than a week ago when markets priced a similar chance of a 50 bp hike.

“Asian FX trends seem to be following a lot of global currency and fixed income volatility,” said Glavin Chia, emerging markets strategist at Natwest Markets.

“Into the Asian session we have seen more USD weakness, which has benefited regional currencies, though I wouldn’t rule out continued, heightened volatility in the immediate term.”

Most Asian currencies hit 1-month lows as dollar firms after US CPI data

Stocks in the region traded higher on the back of tapering expectations of rate hikes and economic data showing signs of improvement in China, the region’s top trading partner.

Benchmarks in Manila, Seoul, and Singapore gained over 1% each.

Equities in China advanced 0.9% as the country’s retail sales swung back to growth and factory activity expanded for the first two months of this year. It also forecast achieving its annual inflation target of 3% despite some pressures.

“We expect China’s growth momentum to improve further in coming months, driven mainly by the ongoing consumption recovery and still-accommodative macro policy,” said analysts at Goldman Sachs in a note.

Meanwhile, benchmark bond yields in Indonesia fell by 3 basis points to 6.761%.

The country’s finance minister said bond issuance would be front-loaded this year, predicting global interest rates would continue to rise and stay high in the second half of 2023.

Investors in the region will also be watching out for any spillover effects from the collapse of US startup lender Silicon Valley Bank.

Highlights

** Thailand extends diesel tax cut to ease living costs

** Chinese consumers out of COVID gates with caution, rather than zest

** Singapore Q4 final unemployment rate 2.0%