MOST emerging Asian currencies and equities firmed on Wednesday, after less-hawkish-than-feared comments from U.S. Federal Reserve Chair Jerome Powell boosted risk appetite and raised hopes the Fed may soon ease monetary policy.
The peso firmed as much as 0.7%, and the Indonesian rupiah appreciated 0.2%. The Philippines central bank governor Felipe Medalla said inflation "most likely" peaked in January but warned another surprise supply shock could not be ruled out.
Data on Tuesday showed annual inflation in the country rose by far more than expected in January to reach a 14-year high.
The U.S. dollar eased on Wednesday after Fed's Powell acknowledged that interest rates might need to move higher than expected if economic conditions remained strong but said that he felt a process of disinflation was underway.
In a question-and-answer session before the Economic Club of Washington, Powell reiterated that disinflation has begun but warned that Friday's blockbuster jobs report showed why the battle against inflation will "take quite a bit of time."
"It appears that markets had a bout of selective hearing. In particular, Powell's allusion to 'dis-inflationary process ... has begun' dominated the takeaway for markets, serving as a selective excuse to extend Fed pivot rallies," Vishnu Varathan, head, economics & strategy at Mizuho Bank, wrote in a note.
Most equities in the region were also higher, with stocks in Manila, Singapore and Seoul each adding 0.8%, 0.2% and 1.3%.
Meanwhile, the Reserve Bank of India (RBI) hiked its key repo rate by a quarter percentage point on Wednesday as expected but surprised markets by leaving the door open to more tightening, saying core inflation remained high.
The Indian rupee was up 0.1% and the benchmark Nifty gained 0.8%.
"It seems reasonable to conclude that until measures of inflation present less of a threat, by falling below 6% and remaining there for a couple of months, we can't rule out further rate hikes," Robert Carnell, regional head of research, Asia Pacific at ING, wrote in a note.
In Malaysia, the ringgit added 0.1% while equities eased 0.5%. Malaysia's gross domestic product (GDP) data is scheduled for release on Friday.
Analysts at Barclays expect fourth-quarter GDP growth at 7.1% year-on-year and see another 25 basis point rate hike in March.
** The RBI will allow banks to borrow and lend government bonds in a move that could add depth and liquidity to the market, the central bank chief said
** Taiwan's exports fall for a fifth straight month in January due to a deteriorating global economy and factory closures during the long Lunar New Year holiday - Reuters