Asian currencies tepid; stocks higher on US rate cut bets

Most Asian currencies were heading for weekly declines on Friday, although largely unchanged, while stocks were higher on optimism about US rate cuts stirred by fresh signs of a cooling labour market.

Regional forex markets lost the ground they gained last week when the dollar weakened from the US Federal Reserve’s dovish shift following softer-than-expected jobs data for April.

The Philippine peso inched up 0.1%, but was on course for a weekly decline of 0.3%, having gained nearly 1% last week. The South Korean won gained 0.1%, but was on track for a weekly fall of 0.5% after two weeks of gains.

The Malaysian ringgit was largely flat this week, as it pared last week’s climb of 0.6%.

The central bank kept its interest rate unchanged on Thursday, saying the ringgit’s weak performance did not reflect economic fundamentals.

Although the ringgit has stabilised over the past month from earlier hovering around its 20-year lows, but is still down 3.1% this year.

“We reckon that Bank Negara Malaysia likely drew some comfort from the Malaysian ringgit’s regional outperformance over the past month, despite external-driven volatility,” analysts at DBS Bank said, referring to the central bank.

Among other currencies, the Singapore dollar lost 0.1%, set for its worst week since early April with a fall of 0.3%. It rose 1% in the prior week.

The Taiwanese dollar was slightly lower on Friday but was poised for a fourth consecutive weekly fall.

Stocks in the region were higher after Thursday’s data showed greater than expected US initial claims for state unemployment benefits for the week ended May 4, reinforcing prospects for rate cuts after the Fed’s dovish tilt last week.

Traders are now pricing in two rate cuts of 25 basis points this year versus one before the payrolls data.

South Korean stocks led the gains in emerging Asian equities with a jump of 1.2%, while Singapore stocks rose as much as 1%.

Stocks in Taiwan gained 0.7%, while Manila shares were up 0.9%. Malaysian stocks were largely unchanged, while equities in Thailand inched down 0.2%, bucking the regional trend. Financial markets in Indonesia were closed for a public holiday.

Asian currencies were largely muted on a firmer dollar and most regional stocks slipped as investors cautiously awaited US inflation data for clues to the Federal Reserve’s rate outlook, while Malaysia’s central bank held rates steady as expected.

The South Korean won fell 0.6%, and the Taiwanese dollar inched 0.2% lower.

The Malaysian ringgit inched 0.1% higher after the central bank held its benchmark interest rate unchanged at 3%, against a background of a weakening currency and a steady inflation outlook.

The decision came in line with market expectations, with a Reuters poll expecting the Bank Negara Malaysia (BNM) to keep its policy rate unchanged until at least 2026.

Some analysts had not ruled out the chance of a rate hike, citing the upside risk to inflation.

Indonesia’s financial markets were shut for a public holiday. On Tuesday, its central bank governor said a further rate hike was probably not needed as last month’s increase drew capital inflows and stabilised the rupiah amid a betterthan-expected global backdrop.

The rupiah has lost nearly 4% this year, while the ringgit has depreciated 3.2% in 2024.

Other regional currencies, such as the Singapore dollar and the Philippine peso, were largely unchanged.

Most stocks in the emerging Asia region were lower as investors awaited US consumer inflation data for April, due on Wednesday, to get more clues about the Fed’s stance on rate cuts, after a dovish signal from last week’s softer-thanexpected jobs data.

Stocks in South Korea fell as much as 1.3%, while Philippine shares lost 1.9% after data showed the economy accelerated less than expected in the first quarter.