(Feb 29): Asian currencies were headed towards monthly declines, while equities were mixed on Thursday as investors remained cautious ahead of key US data that could shed light on the timing of the Federal Reserve’s rate cuts.
Regional currencies, which rose towards the end of 2023 on an unexpected dovish shift from the Fed, have lost ground in 2024 as markets scale back expectations of a rate cut to June from March at the start of the year.
The Thai baht edged 0.2% higher but was set for a 1.1% loss for February, while the Singapore dollar gained 0.1%, eyeing an 0.3% monthly fall.
Malaysia’s ringgit inched up 0.2%, but was on track to lose 0.7% for the month and has declined 3.7% so far in 2024.
The currency reached a 26-year-low last week, levels last seen during the 1998 Asian financial crisis.
Country’s second Finance Minister Datuk Seri Amir Hamzah Azizan said Malaysia expects the ringgit’s value to appreciate this year given positive fundamentals and prospects, adding that the government will not peg the ringgit as it did in 1998.
The response echoed previous statements from Prime Minister Datuk Seri Anwar Ibrahim and the Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour that the currency is undervalued.
“We see rising risks of verbal intervention as BNM’s tolerance for MYR volatility could be tested closer to the level of 4.80/USD,” analysts at BofA wrote.
The intervention may not be enough to sustainably support MYR due to stronger USD and negative carry, they added.
Meanwhile, the Taiwanese dollar was largely unchanged and set to lose 0.9% in February after a 1.8% fall in January.
Traders in Taiwan said cross-strait tensions weighed on the local currency. China’s coast guard has begun patrolling near the Taiwan-controlled Kinmen islands after two Chinese nationals died trying to flee Taiwan’s coast guard.
Stocks in the region were largely mixed ahead of US January personal consumer expenditures (PCE) price index — Fed’s preferred inflation measure. It is expected the index to have risen 0.3% on a monthly basis after a 0.2% increase in December, according to Reuters poll.
Shares in the Philippines rose as much as 1%, on track to gain 4.5% in February, while Taiwan stocks gained 0.6%, set for their best month since November 2023.
On the other hand, Thailand stocks dropped as much as 0.7% while Malaysian stocks were up as much as 0.5%.
Amongst local data, focus is on February inflation data from Thailand and Indonesia, both due on Friday, for clues that when regional central banks could start cutting rates.
“Stronger USD and higher US rates have also pushed back expectations for Bank Indonesia’s rate cut cycle and have weighed on debt flows over the last month,” BofA analysts said.
