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Updated December 27th, 2023 at 11:33 IST

Asian currencies, stocks rally amid optimism over potential US rate cut

The MSCI's emerging market currency index saw 0.2 per cent increase, reaching its highest level since April 2022.

Business Desk
Nikkei
Nikkei | Image:Shutterstock
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Most emerging Asian currencies and equities rose on Wednesday, drawing inspiration from a weakening US dollar and a positive trend on Wall Street. Investor optimism persists, driven by expectations that the US Federal Reserve might initiate rate cuts as early as March 2024.

The MSCI's emerging market currency index saw 0.2 per cent increase, reaching its highest level since April 2022. Simultaneously, the MSCI's emerging market Asia index advanced 0.5 per cent, poised to break a two-year losing streak and post a yearly gain.

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Investors are placing their bets on the anticipation that major central banks globally may embark on rate-cutting measures next year, with the Federal Reserve leading the way. According to Tim Waterer, an analyst at KCM Trade, the US dollar is losing favour among traders, allowing emerging market currencies to shine. He also noted that the yield advantage the US has enjoyed throughout 2023 is likely to diminish once the Fed initiates rate cuts.

The Thai baht rose 0.4 per cent, hitting highest level since August 3. Meanwhile, the Indonesian rupiah, among the top-performing currencies in the region this year, advanced 0.5 per cent, achieving its highest level in nearly a month. Equities in Indonesia gained 0.6 per cent, reaching their highest level since September 2022.

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The Taiwanese dollar exhibited strength with a 0.4 per cent increase, trading at its highest level since April 20. Simultaneously, Taiwanese stocks advanced by 0.6 per cent, reaching their highest level since April 20, 2022.

While central banks in Indonesia, Taiwan, and the Philippines maintained their key interest rates in their recent policy meetings this month, they sounded less dovish than the Fed. Despite concerns over an easing inflation trend in the region, these central banks may find little room to adjust rates.

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Market participants are now turning their attention to upcoming data releases, including South Korea's industrial output figures and Thailand's trade data scheduled for later in the week. The ongoing optimism and positive market sentiment highlight the impact of central bank decisions and global economic expectations on Asian currencies and equities.

(With Reuters inputs)
 

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Published December 27th, 2023 at 11:26 IST

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