Emerging Asian currencies struggled for direction on Friday, while equities jumped after China accelerated efforts to stabilize the yuan, and investors awaited US jobs data for clues on the Federal Reserve’s future rate hike path.
The Malaysian ringgit weakened 0.1 percent while the Philippine peso appreciated 0.3 percent against the US dollar. Equities in Kuala Lumpur and Manila advanced 0.6 percent and 0.1 percent , respectively.
The Chinese yuan slipped 0.1 percent after strengthening 0.3 percent earlier in the day, while equities in Shanghai jumped 0.3 percent .
China’s central bank said it will cut the amount of foreign exchange that financial institutions must hold as reserves for the first time this year, a move seen aimed at slowing the pace of recent yuan depreciation.
However, Jessica Amir, a market strategist at trading platform Moomoo, said investors and traders are not convinced this is the “silver bullet to fix China’s economy”.
Meanwhile, China’s factory activity surprisingly returned to expansion in August, a private-sector survey showed, with supply, domestic demand and employment improving, suggesting efforts to revive growth might be having some effect.
“This is definitely not a sign of a recovery yet. China could very well face a monumental credit crunch,” said Amir.
The Indonesian rupiah fell 0.2 percent , while shares in Jakarta added 0.2 percent . Data showed the country’s annual inflation inched up in August, remaining within the central bank’s target range.
Analysts at Barclays say that despite the “benign CPI inflation”, their base case remains for Bank Indonesia to embark on 75 basis points of rate cuts in 2024, but only in the second half.
Additionally, data overnight showed US consumer spending increased the most in six months in July, but slowing monthly inflation rates cemented expectations that the Fed would keep rates unchanged next month.
US August payrolls data, due later in the day, could offer more clues. Markets are now anticipating an 89 percent chance of the Fed pausing rate hikes this month, the CME FedWatch tool showed. – Reuters
