Asian currencies, stocks subdued; all eyes on US inflation data

EMERGING MARKETS-Asian currencies, stocks subdued; all eyes on US inflation data

Updated at 0728 GMT

By Echha Jain

Jan 10 (Reuters) –The Philippine peso and the Thai baht fell most among emerging Asian currencies against the greenback on Wednesday, while equities were also under pressure ahead of crucial U.S. inflation data that will likely offer more clarity on the timing of rate cuts.

The peso PHP= depreciated as much as 0.5% against the U.S. dollar to hit its lowest level since Nov. 3. Data showed the country’s trade balance in November remained in substantial deficit. The Indonesian rupiah IDR= fell 0.4% to its lowest in nearly a month.

The baht THB=TH slipped 0.2%, paring losses from earlier in the session, when it had fallen as much as 0.9% to 35.20 per U.S. dollar, its lowest level since Dec. 14.

Thai Prime Minister Srettha Thavisin said he discussed interest rates in a meeting with the country’s central bank governor but has no power to interfere in monetary policy decisions.

This comes after Srettha, who is also finance minister, urged the central bank earlier this week to consider cutting interest rates to help the economy, with inflation at very low levels.

Among equities, Singapore stocks .STI retreated as much as 1.2%, followed by equities in Manila .PSI, which slipped as much as 1.1%.

Traders are awaiting U.S. inflation data, due on Thursday, to assess the timing and size of any Federal Reserve interest rate cuts in 2024.

“A softer (inflation) print should see goldilocks trade returning while USD and UST yields can ease off. This should help weigh on USD/AxJs,” said Christopher Wong, a currency strategist at OCBC.

Still, higher inflation is not ruled out, Wong added, which should see further unwinding of aggressive Fed rate cut bets.

Expectations that the Fed could be cutting rates as soon as March have been slowly decreasing. Markets are currently pricing in a nearly 68% chance that the Fed could begin easing rates in March, the CME FedWatch Tool showed.

Back in Asia, the won KRW=KFTC slipped as much as 0.5% to its lowest level since Dec. 7, 2023. Stocks in Seoul .KS11 declined for a sixth straight session, losing as much as 0.8% to hit their lowest level since Dec. 14, 2023.

The Bank of Korea (BOK) is set to announce its key base rate on Thursday. Economists are expecting the BOK to keep the key policy unchanged until at least Q3 despite some concerns around financial stability, a Reuters poll found.

“While we do not expect BOK to cut rates just yet as inflation pressures remain, a shift towards a neutral stance may imply consolidation for USD/KRW in the short-term,” analysts at DBS wrote.

Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corp, said he sees most central banks in the region standing pat as well, likely in line with the BOK, and think about rate cuts later in the year.

Hence, there would be limited impact on the emerging Asian currencies for now, he said.

Meanwhile, the Taiwanese dollar TWD=TP fell 0.3% while stocks in Taipei .TWII retreated 0.4%. Taiwan goes to the polls on Saturday to elect a new president and parliament.

HIGHLIGHTS:

** Thai corporate bond issuance seen up to $28.5 bln this year

** Japanese shares hit near 34-year high on tech gain, weaker yen

Asia stock indexes and currencies at 0728 GMT
COUNTRY	FX RIC	FX DAILY %	FX YTD %	INDEX	STOCKS DAILY %	STOCKS YTD %
Japan	JPY=	-0.37	-2.72	.N225	2.01	2.92
China	CNY=CFXS	-0.07	-1.06	.SSEC	-0.54	-3.27
India	INR=IN	+0.02	+0.13	.NSEI	-0.15	-1.01
Indonesia	IDR=	-0.35	-1.12	.JKSE	0.46	-0.54
Malaysia	MYR=	-0.09	-1.21	.KLSE	-0.72	2.29
Philippines	PHP=	-0.44	-1.58	.PSI	-1.09	1.49
S.Korea	KRW=KFTC	-0.33	-2.43	.KS11	-0.75	-4.27
Singapore	SGD=	-0.11	-0.98	.STI	-1.03	-2.33
Taiwan	TWD=TP	-0.34	-1.26	.TWII	-0.40	-2.59
Thailand	THB=TH	-0.23	-2.33	.SETI	-0.06	-0.12

Reporting by Echha Jain in Bengaluru; Editing by Muralikumar Anantharaman and Mrigank Dhaniwala