M'sia and S.Korea may show how central banks have vanquished the 2018 currency crises

  • Economy
  • Tuesday, 22 Jan 2019

SINGAPORE: South Korea and Malaysia may provide further evidence this week that emerging-market central banks have successfully vanquished the currency crises of 2018, with policy makers in both countries forecast to hold interest rates steady.

Turkey, Indonesia and South Africa all kept rates on hold last week, underscoring how tighter monetary policy in many developing economies is keeping the lid on inflation, part of a mix that’s helping to fuel stocks, bonds and currencies.

Despite gains that drove the MSCI’s stocks index to its longest stretch of weekly gains in a year, the trade war risks haven’t disappeared, as a string of Chinese data releases yesterday showed the impact of the trade dispute.

The Bank of Korea, which last boosted borrowing costs in November, is forecast to keep its seven-day repo rate at 1.75% on Thursday. The bank is also due to release its quarterly economic outlook. A downgrade to the outlook shouldn’t come as a surprise, as the GDP growth estimate of 2.7% for 2019 looks to be far off given the global slowdown in the tech sector, according to ING Groep NV.

Bank Negara is expected to hold its overnight policy rate at 3.25%; the bank’s most recent move was a year ago, when it raised the rate by 25 basis points.

Nigeria’s Monetary Policy Committee meets today, with analysts expecting it to hold the main rate at 14%. Investors will see whether governor Godwin Emefiele responds to criticism from Atiku Abubakar, the leading opposition candidate in next month’s elections. Abubakar said in a Bloomberg interview that he’d replace Emefiele if he wins and that the naira should be floated.

Angola is scheduled to announce an interest-rate decision on Friday. — Bloomberg


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