Asian currencies and stocks exhibited mixed movements on Tuesday as global markets keenly awaited testimony from Federal Reserve Chair Jerome Powell. Investors are hoping for dovish remarks that could indicate a potential interest rate cut in September, a move that would likely benefit riskier assets and regional economies.
Currency Movements
Despite a softer US dollar, several Asian currencies faced declines. The Indonesian rupiah dropped by 0.4% following four consecutive days of gains, while the Taiwanese dollar decreased by 0.2%. The Thai baht and South Korean won edged down by 0.1% and remained largely unchanged, respectively, alongside the Malaysian ringgit.
Interest rate decisions from Malaysia and South Korea are anticipated on Thursday. A Reuters poll suggests that Bank Negara Malaysia will maintain its key policy rate until at least 2026 due to expected inflation increases later this year. Similarly, the Bank of Korea is expected to hold rates but may consider easing in the next quarter.
Regional Stock Performance
Stock performances were mixed across the region. Indonesian shares rose by 0.7%, reaching their highest level since late May. Singaporean stocks gained 0.4%, nearing their record highs driven by strong performance in local bank stocks. This optimism is fueled by anticipated dividend payouts and sustained higher interest rates in both the US and Singapore, according to Lloyd Chan, senior currency analyst at MUFG Bank.
Conversely, stocks in Kuala Lumpur increased by 0.4%, while Taiwanese and Thai stocks declined by 0.3% and 0.2%, respectively.
Central Bank Policies and Inflation Reports
The Philippine central bank appears to have more room to maneuver, with Governor Eli Remolona suggesting a potential interest rate cut in August following a slowdown in annual inflation for June.
The upcoming US inflation report, due on Thursday, could further influence market expectations, currently reflecting an 80% probability of a rate cut in September, up from 64% last week.
Market participants are also closely monitoring upcoming economic data from China and Singapore. China’s inflation data is due on Wednesday, while Singapore is set to release advanced GDP estimates on Friday.
