BENGALURU: Most emerging Asian currencies and equities retreated on Friday as investors reassessed the timing of US monetary policy easing following robust economic data and hawkish Federal Reserve meeting minutes.

The Malaysian ringgit and the Thai baht declined 0.3% each.

Equities in the Philippines declined as much as 1.1% and Malaysian stocks retreated 0.6%. Equities in Taiwan slipped 0.3%, a day after a tech-fuelled rally following AI chip leader Nvidia’s quarterly results which helped the benchmark hit a record high.

Stocks in South Korea were on track for their worst week in five.

Overnight data showed US business activity accelerated to the highest level in just over two years in May and manufacturers reported a surge in prices for a range of inputs, denting sentiment towards riskier Asian assets with the market expecting the Fed to keep rates higher for longer.

“For the year, markets are just pricing in 35 basis points (bps) cut compared to 44 bps cut a week ago,” said Christopher Wong, a FX strategist at OCBC.

Earlier this week, minutes from the Fed’s April 30-May 1 meeting indicated willingness from some officials to consider a rate hike to reign in inflation.

“The USD rate environment is undisputedly a key driver for sentiment in Asian markets,” said Frances Cheung, a rates strategist at OCBC.

“As long as the risk of Fed pivoting back to tightening is low, Asian markets shall be able to focus on domestic and idiosyncratic factors. The overall sentiment appears to be one that investors are convinced that peak Fed hawkishness has passed,” Cheung added.

Central banks in Asia such as the Bank Indonesia and Bank of Korea kept interest rates unchanged this week while the Philippine central bank hinted at cutting rates in August last week.

“Most Asian central banks shall be able to primarily focus on domestic factors when they decide on monetary policy, while currency valuation comes into play if there is a material impact on imported inflation,” Cheung said.