What’s going on here?
Emerging Asian markets surged on Thursday after US inflation data came in lower than expected, and the Federal Reserve signaled fewer rate cuts this year.
What does this mean?
The South Korean won led the charge with a 0.7% gain, while the Malaysian ringgit edged up 0.1%. Stock indices in Seoul soared 1%, with Singapore and Malaysia seeing increases of 0.5% and 0.3%, respectively. Taiwan’s benchmark index set a new record with a 1.8% jump, and the Taiwanese dollar rose 0.2%. In India, stocks hit an all-time high, although the rupee stayed flat. This exuberance followed a report showing steady US consumer prices in May, prompting the Fed to hold rates and hint at delaying policy easing until December. Fed policymakers now project only one rate cut this year, down from three expected in March.
Why should I care?
For markets: A mixed bag for investors.
While the Thai baht fell 0.3% and Thai stocks remained largely unchanged, other Asian markets rode the wave of optimism. Analysts at Maybank warned that despite the rally, uncertainty around inflation and market caution could elevate the dollar index. They also noted that higher US rates for an extended period could be unfavorable for Asian currencies, given the lone rate cut projected for this year.
The bigger picture: Shifting sands in global finance.
Taiwan is expected to maintain its policy rate due to inflation concerns, while India’s retail inflation eased slightly in May, mainly from lower gasoline prices. Meanwhile, China has committed to stabilizing its currency market and urged the EU to rethink its EV tariffs. Adding to the global financial landscape, the IMF approved the second review of Sri Lanka’s $2.9 billion bailout, signaling ongoing international support for the region.
