Most Asian currencies, stocks rise ahead of Fed decision
.
Bank of Japan raises short-term rates
Thai baht, Malaysian ringgit lead gains
Inflation data awaited from S.Korea, Indonesia
By Archishma Iyer
July 31 (Reuters) -Emerging Asian currencies rose on Wednesday while most stock markets inched higher, with investors awaiting the U.S. Federal Reserve policy decision due later in the day after the Japanese central bank raised rates for the second time since 2007.
The Malaysian ringgit and the Thailand baht gained most among emerging Asian currencies. The baht THB=TH rose about 0.3%, while the ringgit MYR= climbed about 0.4% to linger near its January highs on economic growth prospects and bets of U.S. rate cuts in coming months.
Investors globally were awaiting the decision of the world's most influential central bank where it is likely to stay pat on rates, but further commentary on a possible interest rate cut in September will be keenly eyed.
Market participants have largely priced in a September rate cut, with more than 85% odds of a 25 basis-point reduction, according to the CME FedWatch tool.
The Bank of Japan raised its short-term interest rate target to 0.25% and unveiled a detailed quantitative tightening plan.
Among other Asian currencies, the Singapore dollar SGD=, the Philippines peso PHP= and the South Korean won KRW=KFTC were flat to 0.2% higher.
The Fed cutting rates could pave the way for Asian central banks to start easing their own policy stances, even though it may not be as beneficial for emerging Asia, according to Jonathan Koh, an economist and FX analyst from Standard Chartered said.
"I think some (Asian) central banks could cut interest rates following the Fed, so in a way the interest rate differential may not actually narrow in favour of Asian currencies but usually when the Fed cuts, it may lead to a risk-on sentiment for the EM Asia currencies," Koh said.
A wider interest rate differential is usually beneficial for riskier emerging market assets as investors will seek higher returns, boosting capital inflows.
Asian traders were also awaiting inflation data from Indonesia and South Korea, due this week, to gauge the stance of their respective central banks in terms of interest rates.
Both central banks had held their interest rates earlier in month, citing that more economic evidence was needed to pivot to rate cuts.
Most emerging Asian share markets rose, with Chinese stocks .SSEC up about 1.8%, while Thailand .SETI, Philippines .PSI, Malaysia .KLSE and Indonesia .JKSE traded higher between 0.2% and 0.6%.
HIGHLIGHTS:
** Reserve Bank of India to hold rates in August, first cut in Q4
** Hamas chief Ismail Haniyeh killed in Iran, Hamas says
** China's July factory activity shrinks, services grow more slowly
Asian stocks and currencies at 0416 GMT | ||||||
COUNTRY | FX RIC | FX DAILY % | FX YTD % | INDEX | STOCKS DAILY % | STOCKS YTD % |
Japan | JPY= | -0.30 | -7.94 | .N225 | -0.97 | 14.02 |
China | CNY=CFXS | +0.09 | -1.94 | .SSEC | 1.79 | -1.48 |
India | INR=IN | +0.02 | -0.60 | .NSEI | 0.18 | 14.59 |
Indonesia | IDR= | -0.03 | -5.55 | .JKSE | 0.17 | -0.26 |
Malaysia | MYR= | +0.30 | -0.35 | .KLSE | 0.43 | 11.29 |
Philippines | PHP= | +0.13 | -5.32 | .PSI | 0.32 | 2.75 |
S.Korea | KRW=KFTC | +0.22 | -6.77 | .KS11 | 0.59 | 3.73 |
Singapore | SGD= | -0.04 | -1.76 | .STI | 0.22 | 6.45 |
Taiwan | TWD=TP | -0.08 | -6.50 | .TWII | 0.19 | 24.17 |
Thailand | THB=TH | +0.29 | -4.43 | .SETI | 0.74 | -6.93 |
Reporting by Archishma Iyer in Bengaluru; Editing by Subhranshu Sahu
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