Most Asia FX rangebound, interest rate outlook in focus

MOST Asian currencies drifted within a narrow range on Thursday as traders awaited fresh cues on the global interest rate outlook, while the Indonesian stock market hit another record high.

Shares in Southeast Asia’s largest economy advanced as much as 0.5% to 7,454.45 points, with the Jakarta index set for its fifth consecutive daily gain.

Sustained equity inflows into Indonesia’s benchmark indexes, coupled with Prabowo Subianto’s presidential election victory promising policy stability, have bolstered sentiment.

Foreign investors have injected about $1.1 billion into Indonesian equities in the first two months of the year.

On Wednesday, they purchased stocks worth $448.4 million, the largest single-day investment since April 20, 2015, according to LSEG data.

Globally, market participants are awaiting a range of U.S. economic data including retail sales – a key measure of consumption – due later on Thursday.

This data comes ahead of the Federal Reserve’s policy meeting next week, where focus will be on how soon policymakers could consider easing interest rates.

Markets now anticipate a 65% chance of a rate cut in June, down from 71% earlier in the week, following a hotter-than-expected U.S. CPI report that tempered expectations for an imminent reduction, according to the CME FedWatch Tool.

“The path to a gradually weaker USD could be bumpy and we view this episode as one of the bumps and opportunity to sell USD on rally,” Maybank said in a note.

The dollar index, which measures the strength of the greenback against six major currencies, was at 102.88 at 0655 GMT.

In Asia, the South Korean won slipped 0.2%, while other currencies such as the Indonesian rupiah, Malaysian ringgit and the Thai baht remained flat.

The Taiwan dollar edged down about 0.2%. The country’s central bank governor suggested no rate cuts before June, citing the need to potentially raise the 2024 inflation forecast.

Among Asian equity markets, Bangkok and Mumbai rose about 0.5% and 0.9%, respectively, while Manila fell 0.2%.

Seoul stocks rose 0.9% to their highest level since April 2022, after the Asian trade bellwether said it would accelerate the preparation of follow-up measures to the government’s corporate reform plan.

Singapore shares climbed 0.8%, even as the country’s largest telecom provider Singapore Telecommunications fell as much as 2%, after reports indicated that it was in advanced negotiations to sell a significant stake in Australian telco Optus to Canada’s Brookfield Asset Management.

HIGHLIGHTS:

** Indonesia benchmark 10-year yield rises to 6.648%

** BOJ to go slow in hiking rates after ending negative rates, says ex-c.bank executive

** Bank of Korea cautious in final stage of inflation fight – Reuters