ASIAN currencies and equities ended the week lower on Friday as the U.S. inflation print showed a moderate increase in July, fanning hopes that the Federal Reserve is done with rate hikes, while consumer confidence in Thailand slipped for the first time in 14 months.
The South Korean won led losses in the region, slipping 0.6%, while the Philippine peso and Indonesian rupiah were on track to post their fourth-straight week of losses, easing more than 0.2% each.
U.S. consumer prices rose moderately in July, with consumer price index climbing 3.2% in the 12 months through July which is still way above the Federal Reserve’s 2% inflation target.
Traders however wager that Fed policymakers are unlikely to raise interest rates again in 2023 and will begin cutting them early next year.
“Core inflation for most of the developed world has eased discernibly enough for the respective central banks to become less committed to rate hikes at subsequent meetings,” said analysts at Maybank in a client note.
“Gradual recovery in commodity prices could be enough to raise inflation expectations and for the Fed, to keep rates on hold, at elevated levels for longer … such concerns could keep Asian FX under pressure”.
Equities in the region slipped in tandem with the weakness in global markets, with shares in Singapore dropping 0.9% to a two-week low and the benchmark in India and Jakarta declining more than 0.3% each.
Singapore’s economy expanded less than the government’s advance estimate in the second quarter, with the city-state slightly lowering its economic outlook for 2023.
“We believe the Monetary Authority of Singapore will be even more concerned now about the risk of over-tightening, compared with the start of the year,” said analysts in a Barclays note.
Bangkok shares rose 0.2%, bucking the trend in Southeast Asia. This came despite consumer confidence in the region declining in July, dented by concerns over persistent political uncertainty after the May elections and a slow economic recovery.
Meanwhile, Bangko Sentral ng Pilipinas saw inflation returning to the 2%-4% target before the fourth quarter, after the country’s economy grew at its slowest pace in nearly 12 years.
HIGHLIGHTS
** Rival party backs Thailand’s Pheu Thai in bid to form govt
** Indonesian 10-year benchmark yield up 0.3 basis points at 6.331%
** Rising rice prices in the Philippines fuel food inflation concerns – Reuters