Most Asian stocks inch up, FX tepid ahead of US inflation data

MOST emerging Asian equities edged higher on Tuesday, while currencies were trading flat, with key inflation data from the U.S. and India taking the centre-stage ahead of a policy meeting by the Federal Reserve later this week.

Equities in South Korea and Singapore gained 0.4% each while Indonesian stocks edged 0.2% higher.

Most currencies were largely listless, while the Singapore dollar inched up 0.2%.

“Most of the currencies, asset classes are in consolidation mode ahead of some of these key events data releases,” Christopher Wong, FX strategist at OCBC said.

“We have come to a point that the market is just not doing too much, staying sidelines and deciding after the data what comes after next.”

The closely watched U.S. Labor Department’s Consumer Price Index (CPI) report due later on Tuesday is expected to show inflation still cooling, but staying well above the Fed’s 2% annual target, with core CPI expected to come in at 4%.

Meanwhile, the U.S. Federal Reserve is widely expected to announce a hold in rates on Wednesday and to keep interest rates unchanged until at least July, later than earlier thought.

Wong said rate cuts from the Fed would be positive for Asian currencies, but the extent of how much they could appreciate into next year would depend on how Asian economies fared, in particular China.

The Indian rupee and stocks were largely flat ahead of inflation data due later in the day, which will play a crucial role in determining the trajectory of future monetary policy.

The Reserve Bank of India held rates steady last week, but flagged that the outlook for inflation remained uncertain.

Thailand’s baht (THB) retreated 0.5% to hit its lowest level since Nov. 16.

“THB is playing catch-up with the consolidation in the EM (emerging markets) Asia FX after yesterday’s bank holiday, which comes on the heels of the stronger-than-envisaged U.S. payrolls last week,” Nicholas Chia, macro strategist at Standard Chartered said.

Meanwhile, monetary policy decisions from central banks in the Philippines and Taiwan are also on investors’ radar this week.

The Bangko Sentral ng Pilipinas (BSP) is expected to leave interest rates unchanged for a second month on Thursday due to cooling inflation, according to a Reuters poll.

Taiwan’s central bank is also expected to leave its policy rate unchanged on Thursday.

HIGHLIGHTS:

** Thai 10-year benchmark yields fall 2 basis points to 2.835%

** Malaysia PM aims to rebuild trust with major cabinet reshuffle

** Indonesia’s presidential hopefuls face off in first election debate – Reuters