Thai, Philippine currencies outperform as hawkish Fed jitters persist

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The Philippine peso and the Thai baht

led gains among emerging Asian currencies on Monday, while

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regional equities were mixed as expectations that the Federal

Reserve could keep interest rates higher for longer kept risk

appetite in check.

The baht appreciated 0.8% after weakening 2.4% last

week. Data on Friday showed that Thailand’s economy unexpectedly

contracted in the final quarter of 2022.

The peso strengthened 0.7% after declining 1.9% last

week.

U.S. markets will be closed for a public holiday on Monday.

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Khoon Goh, head of Asia research at ANZ, said modest liquidity

was likely to keep trading within a fairly narrow range as a

result.

The dollar edged higher, helped by a strong run of economic

data out of the United States that raised bets for the Federal

Reserve to stay on its policy tightening path for longer than

initially expected.

Data pointing to sticky inflation, robust retail sales

growth and a still-tight labor market, have led markets to

revisit their rate expectations. Markets are now expecting the

Fed funds rate to peak just under 5.3% by July.

Hawkish comments from Fed officials signaling that interest

rates will need to go higher in order to tame inflation have

also supported the U.S. dollar.

The South Korean won, the Indonesian rupiah

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and the Malaysian ringgit added between 0.1% and

0.4%.

The Fed is due to issue minutes of its last meeting

later this week.

“Markets will be looking out for any signs that Fed is

getting more comfortable with the trajectory of inflation,” Goh

said, adding that further commentary or insights into Fed

officials’ thinking around disinflation will be closely watched.

Meanwhile, China kept its benchmark lending rates unchanged

for a sixth straight month in February, as expected, with the

world’s second-largest economy showing more signs of recovery

from a pandemic-induced slump.

The yuan was largely flat, while stocks in

Shanghai rose 1%.

Analysts at Maybank said they continued to expect that

China’s central bank would cut one-year and five-year loan prime

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rates by 20 basis points (bps) each this year, with the first 10

bps cut forecast around March or April.

“This will help frontload credit support to give additional

impetus to the early stages of economic recovery,” the analysts

said.

Equities in the region were mixed. Stocks in Bangkok

rose 0.2%, while those in Manila and Singapore

fell 0.5% and 0.3%, respectively.

HIGHLIGHTS

** Malaysia’s exports rose 1.6% from a year earlier in

January, slower than expected, government data showed on Monday

** Indonesia posted a $4.7 billion surplus in its balance of

payments for the last quarter of 2022, due to a high current

account surplus

** Thai banks’ non-performing loans stood at 2.73% of total

lending at the end of December 2022, helped by debt

restructuring, the central bank said

Asia stock indexes and currencies

at 0427 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan +0.01 -2.26 <.n2>

China EC>

India +0.20 +0.07 <.ns ei>

Indonesi +0.24 +2.65 <.jk a se>

Malaysia +0.07 -0.61 <.kl se>

Philippi +0.73 +1.03 <.ps nes i>

S.Korea 11>

Singapor +0.04 +0.31 <.st e i>

Taiwan +0.13 +1.11 <.tw ii>

Thailand +0.74 +0.74 <.se ti>

(Reporting by Himanshi Akhand in Bengaluru; Editing by Jamie

Freed)