Asian FX rally fizzles as dollar firms; stocks at 9-month high

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Emerging Asian currencies pared early

strength on Friday as the greenback gained footing ahead of U.S.

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inflation data, while overnight data highlighting a resilient

U.S. economy boosted regional shares to a near nine-month high.

The Philippine peso shed gains to trade flat,

while the Malaysian ringgit edged 0.2% higher, owing to

firmer crude oil prices.

Both the currencies were poised for their third weekly

climb, with the latter rising nearly 4% year-to-date, just

behind the top-performing Thai baht.

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On the other hand, the Pakistani rupee’s steep fall

against the dollar over the previous two days showed signs of

steadying on Friday on hopes of a bail-out package by the

International Monetary Fund.

MSCI’s broadest index of Asia-Pacific shares outside

Japan rose as much as 0.55% to hit an almost

nine-month high, with Jakarta shares leading with a 0.8%

rise.

U.S. GDP data led to “optimism that the Federal Reserve may

be able to engineer a soft landing,” aiding risk sentiment in

Asian markets, according to OCBC analysts.

Investors await the U.S. personal consumption expenditures

(PCE) data, the Fed’s preferred inflation measure, which could

build the case for a 25-basis-point rate hike by the central

bank next week.

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The dollar rose 0.2% against a basket of peers, but

was still on course for a marginal decline this week.

The baht, which has emerged as a top beneficiary of

China’s abrupt dismantling of its COVID-19 curbs, slipped 0.4%

and was set to snap a five-week winning streak.

Indonesia’s rupiah fell 0.2%, after making strong

gains earlier in the week, setting it up for a third straight

weekly gain.

A Reuters poll showed investors were bullish on all nine

Asian emerging currencies for the first time in nearly two

years, as a fizzling U.S. dollar rally and China’s pivot from

its strict COVID-19 curbs boosted appetite for riskier assets.

“The rebuild in FX reserves bolsters the constructive

outlook on Asia FX amid the China reopening story, but we are

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hesitant to chase it as a lot is in the price,” TD Securities

analysts said in a note.

After a slew of rate hikes in 2022, more central banks in

Asia dialed back on their policy-tightening rhetoric last week,

on signs of peak inflation in most regional economies, except

the Philippines.

The Malaysian central bank stood pat on interest rates,

Indonesia signaled an early end to its cycle and Thailand’s

central bank hinted at measured tightening ahead.

Seoul shares gained 0.6% while those in Thailand

and Singapore rose 0.5% each.

Indian stocks dropped nearly 1.6%, dragged lower by

financials on risk aversion due to Hindenburg’s report on the

books of Adani Group companies.

HIGHLIGHTS:

** India’s Union budget due to be presented on Feb. 1, and

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the government will likely borrow a record 16 trillion rupees in

the fiscal year ending March 2024, according to a Reuters poll

** South Korea’s won was down 0.1% while the

Singapore dollar fell 0.2%

** India’s Adani Enterprises Ltd began a record

$2.45 billion secondary share sale for retail investors on

Friday, as a heavy selloff in Adani group companies intensified

after an attack by a U.S.-based short seller

Asia stock indexes and

currencies at 0656 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY YTD % X DAILY % YTD %

%

Japan +0.02 +0.71 <.n2>

China EC>

India +0.01 +1.40 <.ns ei>

Indones -0.30 +3.84 <.jk ia se>

Malaysi +0.24 +3.95 <.kl a se>

Philipp +0.02 +2.18 <.ps ines i>

S.Korea 11>

Singapo -0.24 +1.89 <.st re i>

Taiwan -0.12 +1.12 <.tw ii>

Thailan -0.38 +5.11 <.se d ti>

(Reporting by Savyata Mishra in Bengaluru; Editing by Gerry

Doyle and Sherry Jacob-Phillips)