Asian equities and currencies fell on Friday on expectations of a gradual easing of interest rates after the US Federal Reserve’s rate outlook triggered a rally in the previous session, with currencies on track to end the week lower.
A sharp drop in China’s yuan and stocks also soured investor moodin the region.
The Philippine peso depreciated 0.1percent against the dollar on Friday. It has slipped about 1.1percent so far this week and was headed for its biggest weekly loss since Aug. 11, 2023.
Among equities, Manila stocks slipped 1.2percent on the day and was the biggest laggard in the region, but were up 0.8percent for the week so far. Equities in Singapore fell 0.1percent on Friday.
The US Federal Reserve left its funds rate on hold between 5.25percent and 5.5percent this week and stuck with projections for three cuts by year’s end. But it said it will not start moving until it has more confidence that inflation is sustainably falling toward 2percent .
Market expectations for US rate cuts increased but only very slightly. About 80 basis points (bps) of cuts are now priced in for this year, lower than about 160 bps at the start of the year.
The US dollar index was last up 0.2percent .
The yuan weakened to a four-month low, breaching the psychologically important 7.2 per dollar level, on growing market expectations that Beijing will have to deliver further monetary easing to shore up economic growth.
The fall prompted the country’s major state-owned banks to sell dollars for yuan in an attempt to slow its decline, sources told Reuters.
Shanghai stocks also fell about 1percent , spooked by the sudden depreciation of the yuan.
“The US exceptionalism narrative as well as guidance for slower Fed easing could continue to keep the USD supported for longer. That could probably be why the PBOC decided to allow market forces to drive the yuan a bit more,” said Fiona Lim, senior FX strategist at Maybank.
Elsewhere, the Taiwan dollar slipped 0.5percent while local stocks were up 0.2percent . The country’s central bank surprised markets on Thursday by raising its policy rate, a tightening at odds with the broader trend in the emerging Asian markets.
