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Asia FX, stocks weaker as U.S. recession fears resurface

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Most currencies and stock markets in

Asia trended lower on Friday, as fears of excessive rate hikes

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in the United States leading to a recession resurfaced, while

inflation numbers from Singapore and Malaysia came in line with

expectations.

Multiple U.S. economic indicators, including the third

quarter GDP data, highlighted the U.S. economy’s resilience.

Investors fear this may provide further impetus to the Federal

Reserve to continue hiking rates, potentially tipping the

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economy into a recession.

South Korea’s won weakened 0.4% on the day, and

Indonesia’s rupiah weakened 0.2%.

“While some may argue that the data is backward looking and

the resilient numbers reduce the risk of a ‘hard landing,’ the

confluence of stronger demand and more persistent prices also

suggest that more work needs to be done from the Fed,” said Yeap

Jun Rong, a market analyst at IG.

Meanwhile, Malaysia reported consumer prices for November

rising in line with market expectations, with a rise in food

prices as the main contributor.

“BNM is more focused on domestic economic conditions rather

than the U.S. Federal Reserve or the MYR,” analysts at Barclays

said, forecasting a 25 basis points (bps) interest rate hike by

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the Bank Negara Malaysia (BNM) in January.

The country’s central bank has raised rates four times this

year, by 25 basis points each time.

Malaysia’s ringgit did not react and continued to

trade at around 4.419 to the dollar, 0.1% weaker on the day.

Singapore’s November core inflation reading also came in

broadly in line with expectations. The Singapore dollar,

which was flat leading up to the data release, rose about 0.2%

to trade at 1.3507 to the dollar by 0504 GMT.

Singapore’s benchmark yield was last seen about

5.7 bps higher on the day at 2.965%.

The Singapore dollar is set to be the best-performing Asian

currency this year, having weakened just 0.1% to the dollar. The

Singapore dollar is only allowed to fluctuate within a set range

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decided by the central bank.

In comparison, other Asian currencies have weakened more

than 4%, with India’s rupee weakening over 10% so far

this year.

Sentiment in the markets was also soured by rapid spread of

COVID-19 in China, with a health official expecting infections

to peak within a week. The yuan was broadly

unchanged.

Stocks in Asia were broadly lower, with South Korean stocks

down 1.8%, set to be the worst performing equities among

emerging Asian markets as they had lost more than 22% so far

this year. Markets in Taiwan, India and

Singapore were also down between 0.5% and 1.3%.

HIGHLIGHTS:

** Japan Nov core consumer inflation at four-decade high

** Chinese central bank makes biggest weekly liquidity

injection into banking system in nearly two months

Asia stock indexes and currencies at

0645 GMT

COUNTRY FX RIC FX FX YTD INDEX STOCKS STOCKS

DAILY % DAILY YTD %

% %

Japan -0.26 -13.26 -1.03 -8.88

China +0.00 -9.05 -0.64 -16.62

India -0.11 -10.29 -1.42 2.97

Indonesia -0.16 -8.68 -0.23 3.45

Malaysia +0.05 -5.79 0.06 -6.28

Philippines -0.12 -7.74 -0.50 -8.13

S.Korea -0.36 -7.18 -1.83 -22.30

Singapore +0.16 -0.13 -0.55 4.09

Taiwan -0.22 -9.94 -1.19 -21.67

Thailand +0.30 -3.98 -0.11 -2.57

(Reporting by Harshita Swaminathan; Editing by Eileen Soreng)

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