JAKARTA (Reuters): Asian currencies ended the week lower on Friday as the US inflation print showed a moderate increase last month, fanning hopes that the Federal Reserve is done with rate hikes, while Singapore's economy narrowly averted recession.
The South Korean won led losses in the region, slipping 0.4%, while the Philippines peso and Indonesia's rupiah were on track to post its fourth-straight week of losses, easing 0.2% and 0.3% respectively.
U.S. consumer prices increased moderately in July, showing a trend that could persuade the Fed to leave interest rates unchanged next month. Traders also wager that Fed policymakers are unlikely to raise interest rates again in 2023 and will begin cutting them early next year.
"This inflation print reinforces our view that the Fed will hold in September but lingering fears of inflation reacceleration will likely mean that the door for further hikes will not be closed," analysts at DBS wrote in a client note.
"Our core view for USD rates remains the same. We still see Goldilocks as the most appropriate tag for the current macro backdrop."
Equities in the region slipped in tandem with the weakness in global markets with shares in Singapore leading losses in the region, hitting a two-week low, dropping 1.2%.
Singapore's economy expanded less than the government's advance estimate in the second ,quarter with the country slightly lowering its economic outlook for 2023.
"We view that risk appetite may continue to recover on the back of near-peak rates seen in developed markets, with markets likely pricing in some rate cuts into 2024," Barnabas Gan, senior economist at RHB bank, said in a note.
On the back of current data, Gan expects the Monetary Authority of Singapore to keep its policy parameters unchanged in October 2023.
Meanwhile, Bangko Sentral ng Pilipinas sees inflation to return back to the 2%-4% target before the fourth quarter, after the country's economy grew at its slowest pace in nearly 12 years. - Reuters
