Asian FX gains on improved confidence in global financial system

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Asian currencies rose on Tuesday, with the dollar parked near a

five-week low as risk-on sentiment re-emerged after the weekend rescue of Credit Suisse

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Dissipated some fears of a larger banking crisis.

The Malaysian ringgit and South Korean won appreciated 0.2%, leading

regional gains, while the Indonesian rupiah was flat.

“I think the shotgun marriage between UBS and Credit Suisse brought some much need relief to

global markets,” said Glenn Yin, head of research and analysis at AETOS Capital Group.

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Investor attention is now glued to the US Federal Reserve rate-setting meeting, which

concludes on Wednesday.

Before the banking turmoil, many market participants had been factoring in a 50 basis points

(bps) interest rate hike.

Fed funds futures now show a 28.4% probability of the Fed holding its overnight rate at 4.5%

to 4.75%, and a 71.6% likelihood of a 25 bps increase, according to CME’s FedWatch Tool.

“The Fed’s decision could very well become a make-or-break event for global financial

markets,” Yin said.

Hiking another 25 bps could cause further panic because a tightened supply of US dollars

could disrupt business lifelines, but pausing could also show possible weakness and misssteps, he

added.

In the region, the Philippine central bank is expected to raise its main interest rate by 25

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bps on Thursday, followed by another next quarter, before pausing until the end of the year, a

Reuters poll found.

Controlling inflation, which sat near a 14-year high at 8.6% in February and was down only a

sliver from 8.7% in January, remains a challenge for Bangko Sentral ng Pilipinas (BSP).

The Philippine peso, which dropped around 9% in 2022, is currently flat.

Emerging Asian equities saw gains across the board, following the lead from US stocks as

Fears of a broader banking crisis were seen to allayed.

Stocks in Singapore lead the charge, jumping over 1%, while shares in Manila,

Jakarta and Kuala Lumpur rose between 0.5% to 0.8%.

In South Asia, the Sri Lankan rupee appreciated more than 7% after the

International Monetary Fund (IMF) approved a $3 billion four-year extended financing arrangement

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for the cash-strapped country.

The IMF also said that Pakistan had made “substantial progress” toward meeting policy

Commitments needed to unlock loans the country needs to avoid default.

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official

Asia stocks

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COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY % YTD %

Japan -0.02 -0.17 – 3.26

China -0.07 +0.24 0.15 4.87

India +0.02 +0.13 0.51 -5.69

Indonesia +0.03 +1.40 0.71 -2.79

Malaysia +0.18 -1.68 0.46 -5.83

Philippines -0.05 +2.39 0.82 -0.95

S.Korea +0.21 -3.28 0.29 6.69

Singapore -0.16 +0.04 1.32 -2.15

Taiwan +0.02 +0.39 0.48 9.59

Thailand -0.37 +1.17 0.75 -6.08

(Reporting by Jaskiran Singh in Bengaluru; Editing by Jamie Freed)