Emerging markets: Thailand’s central bank says inflation will be higher than expected as Asian currencies rise after recession woes

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BANGKOK, June 27 (Reuters): Most Asian currencies and stock markets rose as expectations of less hawkish moves from the U.S. Federal Reserve eased fears of a global economic recession.

Downward pressures on the Philippine peso persisted, however. The South Korean won outperformed its regional counterparts, gaining 1.2%, while the country’s main stock index rose 1.8%.

“Slower growth is encouraging markets, as it suggests less tightening work for the Fed in its quest to stabilize inflation,” DBS analysts said in a note.

After U.S. consumer confidence hit a record low in June, investors reiterated late Friday expectations of a 75 basis point (bp) hike in interest rates at the next Fed meeting.

The Fed made it clear that the meeting would see a debate between raising interest rates by 50 basis points or 75 basis points. Fears of a bigger move pushed asset prices lower.

The Indian rupiah and Indonesian rupiah rose 0.1% and 0.3% respectively. However, analysts warn that these gains are unlikely to last, given the underlying theme of recession fears and an uncertain future for global economies.

“While USD bulls may be tamed as recession fears are tempered, the case for unchecked rallies in (emerging markets) Asia FX is hollow, if not misguided,” analyst Vishnu Varathan said. of Mizuho Bank.

Meanwhile, the Philippine peso lost 0.4%, down for the ninth straight trading session.

The currency lost 2.1% last week, its worst week since June 2013. Peso trading was biased to sell as markets appeared unconvinced that the pace of central bank interest rate hikes will reduce inflation.

The Thai baht’s gains were supported by the central bank, saying inflation was likely to be higher than expected and the economy could perform better than expected, pointing to further policy tightening.

The baht rose 0.1%. In China, data showed profits for industrial companies fell at a slower pace in May as factory activity picked up after the easing of Covid-19 restrictions, but profits were still lower due to the continued restrictions.

The yuan faltered but stood 0.1% higher. China’s central bank said over the weekend that it was working to put in place a renminbi liquidity agreement with the Bank for International Settlements.

According to Maybank analysts, this is seen as a step towards the internationalization of the yuan. Equities in Asia were higher overall, with markets in Singapore, India and Thailand rising 0.6% to 1.4%. -Reuter

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