BENGALURU: Equities in Asia extended gains on Tuesday with a jump in Singapore shares, while currencies were largely subdued, still pressured by a strong US dollar as markets have scaled back rate-cut expectations.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%, after a positive start on Monday, rebounding from a dismal 3.7% drop in the last week due to heightened Middle East tensions.
Singapore stocks rose as much as 1.44% to their highest levels in six months, while Malaysian shares touched their highest levels since May 2022 with a 0.5% gain.
In the Philippines, shares were up as much as 1.1%, and Taiwan shares rose as much as 1.5%, while stocks in Indonesia added as much as 1.3%.
Currencies in the region remained tepid as hotter-than-anticipated US inflation data last week led to markets scaling back expectations for rate cuts by the Federal Reserve.
Markets are currently pricing in a 46% chance of the Fed’s first rate cut starting in September, according to the CME FedWatch Tool. A few weeks ago, bets were on June for the US monetary easing cycle to begin.
Market participants are awaiting US first-quarter gross domestic product data on Thursday and personal consumption price expenditures (PCE) index, the Fed’s preferred measure of inflation, on Friday, to further assess the rate-cut outlook.
Back in Asia, “sharp depreciations in Asian currencies will be a key factor for (regional) central banks when thinking about when they’re going to cut rates,” said Lloyd Chan, FX Strategist at MUFG.
The Indonesian rupiah was largely flat ahead of a policy rate decision on Wednesday. The central bank on Friday intervened in forex markets “more boldly to maintain market confidence” after the rupiah hit a four-year low in the last week.
According to a Reuters poll, more than 80% of the economists expected the central bank to hold its benchmark seven-day reverse repurchase rate at 6.00%, whereas the remaining expected a quarter-point hike. They see a rate cut in the next quarter and again in the fourth quarter, later than previously expected.
“I think there’s no catalyst at the moment for sustained strength in the Indonesian rupiah and in terms of rate decisions by Bank Indonesia our base case is still that BI will keep policy rates at 6%,” MUFG’s Chan added.
Elsewhere, the Malaysian ringgit was largely flat, while the Taiwanese dollar and the Philppine peso each inched 0.1% higher.
The Vietnamese dong edged 0.1% higher, but still hovered near its lowest level on record touched last week.