(Jan 31): Most Asian currencies hit multi-month lows on Wednesday, after the US dollar received a boost from bets that the Federal Reserve would not slash interest rates earlier than expected due to resilient economic data from the world’s largest economy.
The Taiwan dollar marked its worst month since September 2022, while the Malaysian ringgit was set for its worst month since May 2023.
The South Korean won and the Philippine peso recorded their worst month since August last year.
Investors globally have pared back expectations that the US central bank would cut benchmark policy rates in March, with the first cut now forecast to come at the April 30-May 1 meeting.
Market participants are awaiting the Federal Open Market Committee’s decision later in the day, where the central bank is expected to stand pat on its rates.
“While conditions could be almost optimal for the Fed to start normalising policy, growth still seems a tad too strong for the Fed start paving the way towards that decision from today,” Maybank analysts wrote in a note.
On the day, most Asian currencies were subdued, with the South Korean won and the Taiwan dollar depreciating the most, slipping about 0.4% each, while Thailand’s baht shed more than 0.3%.
South Korea and Indonesia are set to release their inflation data later in the week. Barclays analysts forecast price pressures in both countries to edge lower.
Moreover, Taiwan is scheduled to report its fourth-quarter gross domestic product numbers later in the day, with a Reuters poll showing the economy likely grew faster than the previous three-month period due to strong domestic consumption and a rebound in exports.
Markets in China were pressured by weak manufacturing activity data that reinforced the need for additional stimulus measures to boost growth.
The Philippine peso edged higher and stocks in Manila rose as much as 1.5% to hit an eight-month high, even as the archipelago nation missed its full-year growth target after the economy lost some steam in the last quarter of the year.
Analysts from Capital Economics expect the Philippine economy’s resilience to fade, as credit growth has come off the boil and should feed through to lower domestic demand growth in the coming quarters.
Among other Asian stock markets, Bangkok, Seoul and Taipei fell between 0.1% and 0.8%.
Shares in Jakarta, Mumbai, Kuala Lumpur and Singapore traded flat to higher.
