Emerging markets: Thai central bank says inflation will be higher than expected as Asia FX rise on respite from recession woes

BANGKOK, June 27 (Reuters) : Most Asian currencies and stock markets moved higher as expectations of less hawkish moves from the US Federal Reserve slightly eased fears of a global economic recession.

Downward pressure on the Philippine peso persisted, however. South Korea's won outperformed regional peers, gaining 1.2%, while the country's main stock index advanced 1.8%.

"Slowing growth is cheering the markets, as that suggests less tightening work for the Fed in its quest to stabilise inflation," analysts at DBS said in a note.

After US consumer sentiment slipped to a record low in June, investors late on Friday dialled back expectations of a 75-basis-point (bps) rise in interest rates at the next Fed meeting.

The Fed has made clear the meeting will see a debate between raising interest rates by 50 bps or 75 bps. Fears of it going for the larger move have pushed asset prices lower.

The Indian rupee and Indonesian rupiah moved 0.1% and 0.3% higher respectively. However, analysts warn such gains are unlikely to last, given the underlying theme of recessionary fears and an uncertain future for global economies.

"While USD bulls may be tamed as recession fears are tempered, the case for unchecked rallies in (emerging market) Asia FX is hollow if not misguided", said Mizuho Bank analyst Vishnu Varathan.

Meanwhile, the Philippine peso lost 0.4%, declining for the ninth consecutive trading session.

The currency lost 2.1% last week, its worst week since June 2013. Trading of the peso has skewed towards selling, as markets seem unconvinced the central bank's pace of interest rate hikes will curtail inflation.

Gains in the Thai baht were supported by the central bank saying inflation was likely to be higher than projected and the economy might perform better than expected, pointing towards further policy tightening.

The baht rose 0.1%. In China, data showed that profits at industrial firms had shrunk at a slower pace in May as factory activity resumed after the easing of Covid-19 curbs, but profits were still lower due to continued restrictions.

The yuan wobbled but settled 0.1% higher. The Chinese central bank said on the weekend it was working on setting up a Renminbi Liquidity Arrangement with the Bank for International Settlements.

According to analysts at Maybank, this is seen as a step towards yuan internationalization. Stocks in Asia were broadly higher, with markets in Singapore, India and Thailand rising between 0.6% and 1.4%. - Reuters

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