Emerging Markets - Philippine peso set for best day in 14 years as Asian markets rally

MANILA (Reuters): Emerging Asian currencies and stocks rallied on Friday, with the Philippine peso set for its strongest daily gain in 14 years, as market participants bet that the US Federal Reserve might be done with rate hikes.

The peso jumped 1.3% to 15,750 per US dollar by 0715 GMT and was on track for its biggest daily gain since December 2009 amid expectation of another rate hike by the country's central bank.

"The peso's surge reflects market expectations for the central bank to hikes rates again considering inflation has accelerated in recent months," said Tan Yanxi, Maybank's FX strategist.

The Bangko Sentral ng Pilipinas (BSP) delivered an off-cycle rate hike on Oct. 26, warning that another increase could come in due course if price pressures continued.

The South Korean won advanced 1.6% and was on course for its biggest daily jump since March 23. It was also on track to break a run of five consecutive weekly losses.

"Stabilisation in the yen and improving global equity sentiment are acting as pillars of support for the won as well. We expect USD/KRW to now trade in a lower 1,320-1,350 range," analysts at DBS Bank said in a note.

In equity markets, Singapore's main index jumped more than 2% and was set for its biggest daily gain since Feb. 3.

Shares in Indonesia and Thailand gained around 1% each. Investor confidence in US bonds improved as the Fed left rates on hold this week and markets cheered a lower-than-expected supply of longer-dated bonds.

Benchmark 10-year US Treasury yields slid to three-week lows on Thursday, driven by renewed demand for longer-dated bonds as confidence grew. The Indonesian rupiah firmed 0.5% and was on track to snap an eight-week losing streak.

The Bank Indonesia has intervened in the foreign exchange market multiple times in the past and even delivered a surprise rate hike earlier this month to shore up the rupiah and tamp down imported inflation.

In Malaysia, the central bank on Thursday kept interest rates steady for the third consecutive time, warning of risks to the growth outlook and assuring that it will manage heightened market volatility.

DBS analysts expect the Bank Negara Malaysia to stay on a prolonged pause, with policymakers assessing the stance to remain supportive of the economy and the ringgit's weakness "not expected to derail Malaysia's growth prospects".

The ringgit added 0.3% and was set to end the week with a 0.8% jump. It has depreciated some 7% so far this year.

Shares in Kuala Lumpur were up 0.8%. Markets now await US payrolls data, which is expected to set the tone for the Fed's monetary policy. - Reuters