(Feb 2): Most Asian currencies and stocks clocked gains on Friday, with the South Korean won and equities leading the way, after risk sentiment got a boost overnight from upbeat earnings reports on Wall Street, even as investors turned their focus towards a monthly US jobs report.
The MSCI International Emerging Market Index rose about 0.2% to its highest since mid-January, while the dollar index was at 103.01 at 0710 GMT.
The markets see Friday’s US non-farm payrolls data as potentially spurring the Federal Reserve to accelerate its rate cut timeline if the numbers come in below forecasts.
Market participants expect the Fed’s first rate cut in May, while the odds of a March cut have fallen to 38% from more than 70% a month ago.
In Asia, shares in Seoul marked their best week since mid-November 2022 and the won rose as much as 0.7% after data showed South Korea’s inflation slowed to a six-month low. The won also posted its biggest weekly gain since end-December.
“Faster disinflation would increase the Bank of Korea’s confidence in achieving price stability in coming months, in our view. Thus, we reiterate our view that the BOK will start rate cuts in July,” Nomura analysts said in a note.
On the flip side, Chinese stocks were on track to record their worst week since late 2018, losing about 5.9% for the week, as protracted economic woes showed no signs of abatement.
Inflation prints from China, Thailand, the Philippines and Taiwan over the next week will set the tone for their respective monetary policies, with price pressures already seen to be slowing in Indonesia.
“While the market is likely to push the base case for the first Fed cut from March to May in the aftermath of the January FOMC, this is unlikely to derail any of the emerging markets easing cycles,” analysts from Citi said in a client note.
Central banks in Thailand and India are expected to keep rates steady in the coming days.
The Philippine peso, Thailand’s baht, Singapore dollar and the Taiwan dollar advanced between 0.1% to 0.3%.
In Indonesia, which holds presidential and legislative elections on Feb 14, President Joko Widodo said his cabinet was working normally, amid reports of discontent among his ministers. The rupiah rose 0.7% while Jakarta stocks ticked lower.
Among Asian equities, Singapore, Manila, Taipei and Bangkok rose, with gains ranging from 0.5% and 1.2%.