Emerging Asian FX mixed on rate hike, recession woes; ringgit, baht gain

Most Asian currencies and equities were mixed on Friday, while the Malaysian ringgit and Thai baht edged higher, as market participants continued to weigh possible rate hikes by the U.S. Fed and global recessionary fears.

The ringgit USDMYR appreciated as much as 0.4% to hit its highest level in nine months, while the Thai baht USDTHB and Philippine peso USDPHP strengthened 0.2% and 0.1%, respectively.

On the other hand, the Chinese yuan USDCNY and Singapore dollar USDSGD fell 0.1% each respectively, while, the Indonesian rupiah USDIDR shed 0.2%. The South Korean won USDKRW depreciated 0.4%.

There are a couple of factors playing together, said Rachana Mehta, co-head, regional fixed income at Maybank Asset Management Singapore. "One is China's reopening and the other has to do with the slowdown in U.S. growth. So market participants are torn between these factors. So that is what I think is driving some markets better than the others."

"I believe these factors are will continue to play out for the next two to three months," Mehta added.

Worries about more U.S. Federal Reserve tightening were heightened by robust U.S. employment data and fresh hawkish rhetoric from central bank officials.

Additionally, Japan's core consumer prices surged to double the central bank's target in December, keeping market expectations alive that the central bank could phase out ultra low interest rates.

Elsewhere in Asia, Bank Negara Malaysia (BNM) surprised markets by keeping its benchmark interest rate unchanged on Thursday, while flagging downside risks to the Malaysian economy from geopolitical tensions and weaker growth from advanced economies.

"We think that BNM is set for a prolonged pause, as it appears to place a higher emphasis on Malaysia’s softer growth outlook in 2023 over elevated inflation levels, coupled with a shift in guidance," said analysts at DBS Bank.

Similarly, the Indonesian central bank, Bank Indonesia (BI), too signalled that its tightening cycle was ending as inflation has cooled faster than expected, while hiking its key interest rate by 25 basis points on Thursday.

Equities across the region too struggled for direction with stocks in Shanghai 000001 gaining 0.5%, while shares in Thailand SET fell 0.3%

HIGHLIGHTS:

** POLL-Palm prices seen falling 23% in 2023 as output rises, but Indonesia to keep supply tight

** UPDATE 1-Philippines, U.S. in talks on holding '2-plus-2 meeting' -envoy

** UPDATE 3-Japan's consumer inflation hits fresh 41-year high, keep BOJ in focus