What’s going on here?
Asian currencies fell on October 1, 2024, as the Fed’s cautious approach to rate cuts dampened hope, though Asian stocks posted mixed gains.
What does this mean?
The Malaysian ringgit slumped over 1% against the US dollar after the Federal Reserve Chair signaled that significant rate cuts in November were unlikely. This drop follows the ringgit hitting a three-and-a-half-year high recently. The Thai baht and other regional currencies – including the Taiwan dollar, Indonesian rupiah, Philippine peso, and Singapore dollar – also traded flat to lower. The Fed’s restrained cuts, suggesting only quarter-percentage-point reductions, have lessened the appeal of riskier assets, leading to safer bets in emerging markets.
Why should I care?
For markets: Navigating uncertainty.
Investors are focusing on upcoming inflation data from South Korea and the Philippines, alongside a pivotal US jobs report that could influence future Fed decisions. Indonesia’s easing inflation in September hints at more potential rate cuts, while the Philippine central bank suggests a modest 25 basis-point reduction. Stock markets in Manila, Jakarta, Bangkok, and Taipei gained between 0.7% and 1.5%, with Tokyo shares up 1.9%, mainly driven by defense stocks.
The bigger picture: Global shifts on the horizon.
The Fed’s cautious rate cuts, paired with strong Chinese stimulus measures, are likely to prompt more aggressive policies from regional central banks. While global economic uncertainty is affecting Asia’s factory activity, China’s stimulus has boosted confidence, with Shanghai shares experiencing their best session in sixteen years. However, regional markets are also aware of potential disruptions due to public holidays, closing markets in Seoul, Hong Kong, and China for the week.
