Philippine stocks climbed nearly 2 percent and the Indonesian rupiah rose for a third session, leading gains in emerging Asian markets as easing US inflation bolstered hopes of the Federal Reserve slowing its pace of interest rate hikes.
The rupiah strengthened as much as 1.3 percent to its highest in nearly four months. The currency has risen more than 3 percent so far in the week, tracking its best weekly gain since June 2020.
“There appears to be a pick-up in foreign portfolio inflows into the Indonesian bond market recently and this is related to more positive sentiment for Asia,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 percent to a seven-month high and was headed for a third consecutive weekly gain.
Stocks in Manila climbed as much as 1.9 percent to their highest in more than eight months, while those in Malaysia and Singapore rose 0.2 percent and 0.5 percent, respectively.
The US dollar swayed, having slipped to its lowest since June earlier in the session, after data showed US consumer prices fell for the first time in more than 2-1/2 years in December.
“Market relief is grounded on solidifying evidence of dis-inflation squaring with the Fed approaching the end of its tightening cycle,” Vishnu Varathan, head, economics & strategy at Mizuho Bank, wrote in a note.
The US rate futures market has priced in two 25-basis point hikes in the next two Fed meetings. The market also projected that the fed funds rate will peak just below 5 percent at the June meeting.
Even if inflation may not have peaked in Asia, earlier concerns about a strong US dollar and local currency weakness have eased, RBC’s Tan said.
There is now a growing concern about the growth outlook in Asia, which will temper the monetary policy trajectory in the region, Tan added.
Bank Indonesia and Bank Negara Malaysia’s policy decisions are due next week.
The ringgit firmed as much as 0.6 percent to touch its highest since April 2022.
Singapore’s dollar added as much 0.1 percent to touch its highest since June 2021 before reversing course to trade lower. — Reuters
