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EMERGING MARKETS-Asian FX, stocks up as less hawkish Fed messaging provides relief

EMERGING MARKETS-Asian FX, stocks up as less hawkish Fed messaging provides relief

Reuters · 07/28/2022 00:05
EMERGING MARKETS-Asian FX, stocks up as less hawkish Fed messaging provides relief

Stocks in Manila set for best day since in 3-weeks

S.Korean won up 0.7%, Indonesian rupiah gains 0.3%

Markets in Thailand closed for local holiday

By Harish Sridharan

- Currencies and stocks in Asia's emerging markets rallied on Thursday as less hawkish than feared messaging from Fed Chair Jerome Powell curtailed safe haven flows to the dollar.

The South Korean won KRW=KFTC strengthened 0.7%, while the Indonesian rupiah IDR=, Singapore dollar SGD= and Malaysian ringgit MYR= also edged up against a soft dollar which slid to a three-week low.

Overnight, the U.S. Federal Reserve hiked rates by a widely expected 75 basis points, sending U.S. treasury yields lower.

"Asian markets are likely to trade firmer in a relief rally that the Fed did hike 100bps," analysts at OCBC said in a research .

Powell sounded suitably hawkish on curbing inflation in his conference, but also dropped guidance on the size of the rate rise and that "at some point" it would be appropriate to slow down.

But with markets still unsure of the potential steps from the Fed, more clarity is before Asian currencies see a lasting respite, particularly as fears that more aggressive hikes might tip the U.S. economy into a recession. FEDWATCH

Equities in Kuala Lumpur .KSLE, Seoul .KS11 and Manila .PSI were all up over 1%.

"In the short-term, there is a decent window for Asian markers to capitalise on the Fed's dovish hike," said Mitul Kotecha, head of EM strategy at TD Securities.

"But it certainly doesn't mean that we are going to see a rush-back of capital inflows. Nonetheless, we can expect the pace of outflows to slow."

Asian markets have seen substantial bond and equity outflows this year, with a surge in U.S. yields and a jump in the U.S. dollar making riskier assets less attractive.

On Wednesday, a senior Indonesian finance ministry official on Wednesday said the central bank's operation to sell some of its government bond holdings has had limited impact on yields.

Analysts have warned that large sales by BI could hit bond yields and spark further capital outflows from the debt market at a time when investors are wary of investing in risky assets.

On Thursday, the yield on Indonesia's benchmark bond ID10YT=RR hit its lowest level in 2-weeks.

In other , Reuters reported that U.S. President Joe Biden and his Chinese counterpart Xi Jinping are expected to talk on Thursday, with Taiwan and Russia's invasion of Ukraine expected to be key agenda items.



HIGHLIGHTS


** Indonesia's palm oil exports gather pace after levy removal - official

** Philippine peso PHP= down 0.3%, bucks regional trend

** Hong Kong central bank raises rates, warns of tighter interbank market



Asia stock indexes and currencies at 0350 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

+0.86

-14.99

.N225

0.16

-3.58

China

CNY=CFXS

+0.17

-5.83

.SSEC

0.57

-9.49

India

INR=IN

+0.10

-6.88

.NSEI

0.00

-4.10

Indonesia

IDR=

+0.31

-4.77

.JKSE

0.87

5.72

Malaysia

MYR=

+0.07

-6.49

.KLSE

0.84

-5.38

Philippines

PHP=

-0.31

-8.42

.PSI

1.38

-11.23

S.Korea

KRW=KFTC

+0.74

-8.81

.KS11

0.92

-18.13

Singapore

SGD=

+0.11

-2.35

.STI

0.27

2.89

Taiwan

TWD=TP

+0.05

-7.45

.TWII

0.20

-17.94

Thailand

THB=TH

-

-9.34

.SETI

-

-4.90



(Reporting by Harish Sridharan in Bengaluru; Editing by Simon Cameron-Moore)

((Harish.Sridharan@thomsonreuters.com;))