(Jan 2): Most Asian currencies and stocks started the year on the back foot, with the South Korean won retreating the most, ahead of economic data from the US and Asia during the week expected to provide clarity on the outlook of interest rates.
The South Korean won retreated 1.1% while the Indonesian rupiah depreciated 0.5%. Equities in Taiwan, which rose nearly 27% in 2023 and posted their best year since 2009, retreated 0.7% on Tuesday.
Focus in on the US economic data during the week including jobs data and nonfarm payrolls. Minutes from the Federal Reserve last policy meeting, where it took an unexpectedly dovish stance, is due on Thursday.
The minutes are expected to provide clues on the trajectory of rate cuts in 2024. Markets are pricing in an 86% chance of rate cuts to start from March, according to CME FedWatch tool, with more than 150 basis points (bps) of easing anticipated in the year.
“I think the market will likely be in wait and see mode or even profits-taking mode ahead of important economic data from the US,” said Poon Panichpibool, markets strategist at Krung Thai Bank.
Meanwhile, inflation data from Asian countries such as the Philippines and Thailand also take the centre stage this week.
Data showed Indonesia’s annual inflation came in below estimates in December, in line with the easing inflation trend in other Asian countries such as South Korea, where data last week showed annual consumer inflation eased for a second month in December.
Christopher Wong, FX strategist at OCBC, said that the easing inflation trend in Asian countries gives central banks breathing room, but that it is doubtful they will cut rates.
“I think it’s still too quick for central banks to react on any one data point. We think most of them will still continue to keep all of the status quo for now,” he added.
The Philippine peso, which snapped a two-year losing streak in 2023, was down 0.3% on Tuesday, while the Thai baht retreated 0.6%.
Thai stocks gained 0.7% for the day, after posting their worst year in 15 years in 2023.
The Singapore dollar was unchanged after data showed the country’s economy grew 2.8% in the fourth quarter year-on-year, faster than some economists had expected and helped by improvements in construction and manufacturing.
The Singapore dollar was last down 0.2%, while equities retreated 0.3%.
