Most emerging Asian currencies and equities retreated on Tuesday as recent comments from U.S. Federal Reserve officials dented hopes on timing of potential interest rate cuts this year ahead of the minutes of the central bank’s latest policy meeting.
READ: South Korean won, Indonesian rupiah lead Asian currencies lower The Philippine peso declined as much as 0.7% to 58.250 per U.
S. dollar, its lowest since November 2022. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.
9%, a day after it rose to its highest level in more than two years after China unveiled substantial measures to support its property sector last week. Equities in China declined 0.7% while stocks in Malaysia retreated 0.
2%, a day after it hit a more than three-year high. Several Fed officials on Monday signaled continued caution on rate policy and inflation despite data last week showing easing consumer prices in April, putting a dent in risk sentiment towards Asian currencies and equities. “Fed officials keeping a cautious tone is understandable, as the inflation outlook is highly uncertain,” said Frances Cheung, a rates strategist at OCBC.
They may need to see a couple of months of easing in inflation to feel confident enough to start cutting rates, Cheung added. “As long as the risk of the Fed pivoting back to tightening is seen as low, the external environment shall be favorable for Asian assets in general.” Markets currently factor in about 41 basis points of Fed rate reductio.
