Most Asian equities and currencies edge higher on rising US rate-cut bets

The Malaysian ringgit surged a four-month high on Tuesday as a result of weak US inflation, fuelling hopes of a Federal Reserve interest rate cut. The ringgit, which had been underperforming in the region, rose 0.3 per cent against the dollar, maintaining its mid-August peak hit on Friday.

Similarly, the South Korean won increased by 0.7 per cent. Stocks in Thailand, India, and South Korea gained 0.1 per cent to 0.5 per cent. The increase came as data from the United States showed that prices fell in November for the first time in more than three and a half years, illustrating the economy's resiliency. This happened as the Federal Reserve of the United States signalled the end of its record tightening of monetary policy and hinted at future rate reductions in 2024.

Christopher Wong, a currency strategist at OCBC, noted that the decrease in core PCE reinforced the perception of a persistent disinflation trend in the US, potentially paving the way for Asian currencies to rebound as the Fed gears up for a rate cut cycle in 2024, thereby reducing the risk associated with the "higher for longer" narrative regarding US rates.

Meanwhile, in Asia, Singapore's key consumer price index slowed to 3.2 per cent in November, aligning with expectations revealed in official data on Tuesday. Prior data from Thailand, the Philippines, and South Korea earlier in the month also indicated a softening of inflation in November, potentially affording central banks some leeway in terms of adjusting rates.

Singapore's Monetary Authority is slated to review its monetary policy settings next month following a shift to a quarterly schedule from a semi-annual one for policy reviews. The Singaporean dollar saw a marginal 0.2 per cent rise, while equities remained largely stable.

Taiwan's dollar surged by 0.3 per cent, marking its highest level since July 20, accompanying a 0.7 per cent rise in Taipei's stocks. Analysts at MIDF Amanah Investment Bank anticipated Taiwan's economy to exhibit a stronger recovery in 2024, bolstered by consistent domestic demand and a rebound in external trade.

On the flipside, China's yuan faced a 0.1 per cent decline amid growing expectations of further monetary easing by Beijing, coinciding with a 0.7 per cent fall in Shanghai's equities. Markets in Indonesia and the Philippines were closed for a holiday.

Notable highlights included Myanmar's central bank mandating exporters sending goods beyond Asia to deposit foreign earnings in local banks within 90 days, Japan automakers planning a $4.3 billion investment in Thailand over the next five years, according to the Thai government, and Philippine President Ferdinand Marcos Jr extending reduced tariffs on rice and other food items until the end of 2024 to stabilise prices.

(With Reuters inputs)