Asian stocks, currencies nudge higher as focus turns to US inflation

• Traders await US PCE data due out later in day
• All Asian currencies set to end 1H in red
• Equities mixed over 1H; Taiwan set for around 29% gain

Asian currencies and stocks gained some ground on Friday and continued to trade in a tight range as caution prevailed ahead of a key U.S. inflation data, after a subdued week of trading impacted by the Federal Reserve’s cautious stance on rate cuts.

The Singapore dollar <SGD=> rose by 0.1%, while the Malaysian ringgit <MYR=> and the Thai baht <THB=TH> were largely unchanged.

“While a firm U.S. dollar and domestic (Thai) politics serve as near-term headwinds for the currency, we retain our sanguine outlook for the Thai baht in the later part of this year,” analysts at MUFG said in a client note.

Legal challenges against Thai politicians, including PM Srettha Thavisin, unsettled domestic politics and financial markets, adding uncertainty to Southeast Asia’s second-largest economy.

Traders keenly await the U.S. personal consumption expenditures (PCE) data, due later in the day, for insights into the Federal Reserve’s policy direction, while also preparing for a wave of inflation data expected next week from Indonesia, South Korea, the Philippines, and Thailand to gauge the potential trajectory of regional monetary policies.

The South Korean won <KRW=KFTC> was up 0.7% after data showed the country’s central bank sold a net $1.82 billion in the first quarter to arrest the local unit’s decline.

The Taiwan dollar <TWD=TP> advanced by 0.3% and logged its third straight week of gains.

In the first half of 2024, the baht, the won and Indonesian rupiah <IDR=>, and the Philippine peso <PHP=> faced substantial declines between 5% and 7%, ranking them as some of the weakest currencies in emerging Asian markets.

Conversely, the Indian rupee <INR=IN> emerged as the strongest performer in the region, experiencing only a slight depreciation of 0.3% year-to-date, buoyed by improving economic fundamentals and foreign investment inflows.

Equities in the region advanced on Friday, with shares in Jakarta <.JKSE> adding 1.6%, while those in Manila <.PSI>, Seoul <.KS11>, and Taipei <.TWII> were up between 0.3% and 0.6%.

Equities in the first half of 2024 displayed mixed results with South Korean, Malaysian and Indian shares poised to end the half-year with gains of 5.2% to 11.1%, while Taiwan shares surged nearly 28.5%, bolstered by strong performance in chip stocks.

HIGHLIGHTS:

• ** Indian bond yields seen easing on global index inclusion
• ** Bank of Mexico holds its benchmark interest rate
• ** Argentina’s lower house approves Milei’s economic reform bill
• ** Dollar breaks 161 yen in countdown to U.S. inflation release

—Reporting by Roshan Thomas in Bengaluru; Editing by Janane Venkatraman