Asian equities, currencies gain, focus shifts to Fed’s policy meeting

* Thai stocks up 0.5% * Fed, BOJ, Bank Indonesia rate decisions due this week * Japan, China, Malaysia, Indonesia and South Korea on holiday By Echha Jain and Sneha Kumar Sept 16 – Most Asian currencies and equities rose on Monday in holiday-thinned trading, with a focus on this week’s Federal Reserve policy meeting, where it is almost certain the central bank will cut its key interest rate, the only question being by how much. Holidays in China, Japan, Indonesia, Malaysia and South Korea made for thin conditions. The broad MSCI emerging markets currency index edged 0.2% higher while the MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%. The Thai baht appreciated 0.3% against the greenback, while local stocks added 0.5%. A senior finance ministry official said on Friday that the country’s economy is expected to grow 3% this year, supported by the government’s digital wallet stimulus programme, new fiscal-year budget spending and an expanded government equity fund. The growth outlook was stronger than the finance ministry’s forecast of 2.7% in July and up from last year’s 1.9% expansion of the economy, which lagged regional peers. The Fed’s two-day monetary policy meeting beginning on Tuesday will take centre stage for the week. Expectations are for the central bank to kick-start an easing cycle, providing room for regional central banks to consider cutting rates. Markets are pricing in a 59% chance of a 50 basis points cut, with a 41% probability of a 25 bps cut, CME FedWatch tool showed at 0455 GMT. “A 25 bps cut will be less than what the market is anticipating, so it is likely to be moderately negative for risk sentiment in the immediate term,” said Alvin Tan, head of FX Strategy at RBC Capital Markets. On the other hand, Indonesia’s central bank is expected to keep interest rates unchanged on Wednesday to support the rupiah but is expected to cut next quarter, according to a Reuters Poll. Market participants will also scrutinise inflation data from Japan and Hong Kong, as well as monetary policy decisions from Taiwan and the Bank of Japan later in the week. The Philippine peso gained 0.3% while stocks in Manila jumped 0.6%. The Taiwan dollar edged 0.3% higher while Taipei stocks gained 0.2%. Separately, official figures on Saturday showed China’s industrial output growth slowed to a five-month low in August, while retail sales and new home prices weakened further, bolstering the case for aggressive stimulus to shore up the economy. Faltering Chinese economic data has raised concerns on whether the country will be able to achieve the government’s official growth target of around 5%. Analysts at Citi revised down their full-year growth forecast for China to 4.7% year-on-year, expecting a weaker fourth quarter. “The demand side is getting more concerning – if trade momentum peaks, domestic demand weakness would increasingly feed into the supply side and erode production strength,” Citi said in a note. HIGHLIGHTS: ** U.S. locks in steep China tariff hikes, many to start Sept. 27 ** Vietnam says 2024 GDP may decline 0.15% due to Typhoon Yagi’s impact ** India accuses Samsung, Xiaomi of colluding with Amazon, Flipkart Asian stocks and currencies at 0350 GMT COUNTRY FX RIC FX FX INDE STOCKS STOCK DAILY YTD % X DAILY S YTD % % % Japan 0.55 0.72 <.N2 – 9.32 25> China EC> India 0.01 -0.80 <.NS 0.00 16.68 EI> Indones – 0.00 <.JK – 7.42 ia SE> Malaysi – 6.79 <.KL – 13.58 a SE> Philipp 0.27 -0.83 <.PS 0.62 9.56 ines I> S.Korea 11> Singapo 0.16 1.83 <.ST -0.45 9.46 re I> Taiwan 0.34 -3.60 <.TW 0.18 21.58 II> Thailan 0.30 3.02 <.SE 0.49 1.10 d TI>
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