Malaysia’s ringgit, Taiwan’s dollar at multi-month peaks as rate-cut hope lingers

THE Malaysian ringgit and Taiwanese dollar touched multi-month highs on Friday, while most other regional currencies were set for weekly gains, as investors continued to bet on prospects of interest rate cuts by the U.S. Federal Reserve next year.

The ringgit was up 0.5% at 0232 GMT, touching its highest level since mid-August. Taiwan’s dollar advanced 0.3% to touch its highest since July 27.

The Philippine peso also added 0.3% to touch a two-week peak, and was set for its best weekly gain since early November.

Most currencies in emerging Asia appreciated during the week, helped by ongoing risk-on sentiment after unusually dovish remarks from Fed Chair Jerome Powell last week ignited hope of sizeable rate cuts in 2024.

Investor focus is now on the U.S. core Personal Consumption Expenditure (PCE) index for November, due later on Friday, for more clarity on the Fed’s rate-cut timing.

The Fed-fuelled “risk-on (sentiment) is prompting a softer U.S. dollar, despite some pick-up in U.S. Treasury yields,” Mizuho analysts said in a client note.

The Indonesian rupiah added 0.2%, recuperating from its slide on Wednesday, while stocks in Jakarta were up 0.4%. Indonesia’s central bank kept its benchmark interest rate unchanged at 6.00% on Thursday after its last policy meeting for the year, echoing status-quo central bank decisions in the Philippines and Taiwan last week.

“For the time ‘higher for longer’ (U.S. rates) remains, Bank Indonesia too would remain on hold, and the BI would eventually follow the Fed with a cut, once the Fed does so,” said economist Kunal Kundu at Societe Generale.

Equities in Singapore surged 0.8% and are set to gain for a fourth consecutive day. Shares in South Korea and Philippines advanced 0.4% and 0.3% respectively.

However, stocks in Thailand fell 0.3%, declining for a fourth session.

Elevated oil prices brought about in part by attacks on Red Sea shipping continued to be a risk to market confidence in net-oil importers in emerging Asia such as Thailand, India and Indonesia.

Higher oil prices could induce inflationary pressure and adversely impact the fiscal health of these countries.

Next week, investors will be watching for the release of Singaporean inflation data, South Korean industrial output figures and Thai trade data.

HIGHLIGHTS:

** Japan’s core inflation slows in November, easing pressure on BOJ

** Emerging market debt wall looks scalable as investors warm to risk

** China bans export of rare earths processing tech over national security – Reuters