Asian currencies subdued ahead of Fed, rupiah stumbles

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Most emerging Asian currencies traded

narrowly on Tuesday, with the Indonesian rupiah hitting a

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one-week low as investors wait to see if the Federal Reserve

will slow the pace of rate hikes as inflation and the economy

show signs of losing momentum.

The rupiah fell 0.2% and Malaysia’s ringgit

eased 0.1%, while Thailand’s baht was flat.

“The market is generally cautious ahead of the major macro

events, namely the Federal Open Market Committee meeting, the

European Central Bank meeting and the U.S. payrolls data,” said

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Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

The Fed is widely-expected to raise interest rates by 25

basis points (bps) on Wednesday – the smallest since the central

bank kicked off its tightening cycle 10 months ago with one the

same size. Analysts expect two more quarter-percentage point

hikes by mid-2023.

“I expect the Fed to reiterate the message that it is not

looking to cut rates this year, contrary to market expectations.

Nonetheless, the market is warming up to the idea that the Fed

will pause soon,” said Tan, adding that risk sentiment is likely

to stay supported in coming weeks.

The Philippine peso was flat, while stocks in Manila

slumped 2.8% and were set to mark their worst day since

Dec. 2 last year.

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Inflation in the archipelago was likely to be within a range

of 7.5% to 8.3% in January after it hit a 14-year high in

December.

India’s rupee fell 0.2%. Stocks in Mumbai

advanced 0.1%, with investors keeping an eye on the final day of

Adani Enterprises’ mega secondary share sale and the federal

budget scheduled for Wednesday.

In other news, data showed China’s economic activity swung

back to growth in January after a wave of COVID-19 infections

passed through the country faster than expected following

Beijing’s sudden U-turn on pandemic controls.

Equities across Southeast Asia were on the back foot, with

stocks in Kuala Lumpur declining 0.8% and Thailand’s

benchmark index shedding 0.3%.

Stocks in Jakarta fell 0.6%. South Korea’s benchmark

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index, which has gained 9% this month, dipped 0.6%.

HIGHLIGHTS:

** China’s troubled property sector will continue to weigh

on growth and will not be an engine of growth until there is

some “cleaning up” of the market, according to the International

Monetary Fund’s chief economist

** Japanese makers of semiconductor manufacturing machinery

and materials used to make chips said on Monday they had yet to

hear from Japan’s government about export restrictions

The following table shows rates for Asian currencies against

the dollar at 0402 GMT.

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan +0.19 +0.71 <.n2>

China EC>

India -0.16 +1.34 <.ns ei>

Indonesi -0.18 +3.82 <.jk a se>

Malaysia -0.07 +3.65 <.kl se>

Philippi +0.04 +2.13 <.ps nes i>

S.Korea 11>

Singapor +0.02 +1.97 <.st e i>

Taiwan +0.29 +2.19 <.tw ii>

Thailand +0.00 +5.59 <.se ti>

(Reporting by Upasana Singh in Bengaluru; Editing by Jacqueline

Wong)