29th April 2024 – Following recent inflation data in the United States, which indicated that immediate interest rate cuts are unlikely, currencies in Asian emerging markets experienced subdued activity. The Indonesian rupiah depreciated by 0.3% against the U.S. dollar, while the South Korean won saw a slight retreat of 0.1%.
Contrasting the currency market, most Asian equities witnessed an upswing, with Manila’s PSEI jumping 2.1% and Taipei’s TAIEX rallying 1.9%. This positive movement in equities may reflect a divergence in sentiment between currency and stock markets or could be influenced by domestic factors unique to each market.
All eyes are now on the Federal Reserve’s two-day monetary policy meeting set to begin on Tuesday. Market consensus does not anticipate rate changes at this meeting.
Investor sentiment has adjusted to expect the first rate cut in September, a delay from previous predictions of a June commencement, projecting approximately 30 basis points of easing for the year.
The Fed’s future communications and policy decisions are poised to be a significant determinant for the direction of the U.S. dollar and subsequently emerging market currencies.
The persistent higher U.S. interest rates, coupled with recent weaknesses in Asian currencies, suggest that regional rate cuts may be postponed until the next year.
The Thai baht and Bangkok stocks both recorded decreases of 0.2%. Meanwhile, the Malaysian ringgit edged lower by 0.1%, even as Kuala Lumpur equities saw an uplift of 0.5%.
The yen experienced a notable rise against the U.S. dollar amid speculation of intervention.
Thai exports saw a decrease of 10.9% year-on-year in March.
Indonesia reported a 15.5% annual increase in Foreign Direct Investment (FDI) for the first quarter, as per the investment ministry.
Enhanced volatility in the forex market, as seen in recent fluctuations following the latest U.S. inflation data, presents both challenges and opportunities for traders. In such a volatile environment, where emerging market currencies like the Indonesian rupiah and South Korean won are experiencing depreciation, there are numerous trading opportunities to capitalise on these rapid movements.
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