Friday, May 20

Asian FX, shares steady as investors brace for Fed policy outcome


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Stocks and currencies in emerging Asian

markets struggled to find direction on Wednesday ahead of the

US Federal Reserve’s policy meeting outcome, where investors

will be looking for any hints of faster policy tightening.

The Fed is expected to update its monetary policy plan later

on Wednesday, with market participants awaiting clues on the

pace of interest rate hikes and a timeline for policy

normalization. (For the latest Reuters poll, see)

Equities in Manila and Seoul fell 0.5% and

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0.4%, respectively, while stocks in Singapore, Kuala Lumpur

Kuala Lumpur and Bangkok rose between 0.5% and 0.9%

after a volatile overnight session on Wall Street.

Balanced current accounts, largely lower inflationary

pressures and the stability provided by the resilient Chinese

yuan to regional currencies have ensured that most Asian central

banks have not been pressured to pursue interest rate hikes as

aggressively as their peers in Europe and Latin America.

However, Fed tightening is putting pressure on some central

banks in Asia to follow suit, potentially hurting their equity

markets, similar to what happened in 2013 when the US central

The bank began tapering its post financial crisis stimulus.

“The recent central bank actions in Asia suggest that they

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may want to prepare for a Fed that is more hawkish than

currently expected,” said Frances Cheung, rates strategist at

OCBC Bank.

“The pre-emptive tightening provides them with some

flexibility to quicken their own tightening paths if there is

any upside surprises from the Fed.”

On Tuesday, Singapore’s central bank tightened its monetary

policy settings in its first out-of-cycle move in seven years, a

day after the city-state reported core inflation at an

eight-year high.

The dollar index was flat at 95.948, while currencies

in Asia were largely subdued.

Malaysia’s ringgit, Indonesia’s rupiah and the

Singapore dollar all traded flat. Thailand’s baht

was an outlier, gaining 0.3%.

In Philippines, Market participants await the country’s

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fourth-quarter gross domestic product data on Thursday, with the

economy projected to have expanded at a slower pace of 6.0% from

a year earlier, based on the median estimate in a Reuters poll.

Financial markets in India are closed on Wednesday for a

holiday.

HIGHLIGHTS

** Singapore shares up 0.9%, on track for their best

session since Jan. 4

** Expected interest rate hikes by Fed may delay emerging

Asia’s economic recovery and keep pressure on policymakers to

guard against risk of capital outflows – senior IMF official

Asia stock indexes and currencies at 0630 GMT

COUNTRY FX RIC FX FX INDEX STOCK STOCK

DAILY YTD % SS YTD

%DAILY%

%

Japan -0.03 +1.04 -0.44 -6.18

China +0.06 +0.53 0.61 -5.10

Indonesia +0.01 -0.68 -0.19 -0.39

Malaysia -0.02 -0.60 0.65 -3.11

Philippines -0.13 -0.44 -0.47 1.84

S.Korea +0.08 -0.74 -0.41 -9.01

Singapore +0.04 +0.39 0.93 4.93

Taiwan -0.07 -0.17 -0.15 -2.99

Thailand +0.30 +1.34 0.47 -0.65

(Reporting by Harish Sridharan in Bengaluru; Editing by

Shailesh Kuber)

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