Asian currencies, stocks positive after fears of banking crisis ease
Most Asian currencies firmed, while equities edged higher on Tuesday as the weekend rescue of Credit Suisse eased some fears of a larger banking crisis, with investors now looking towards the US Federal Reserve's rate-setting meeting.
The Malaysian ringgit led the gains, with most other currencies in the region showing minimal moves, while equities advanced across the board.
"I think any calls on the end of the current banking turmoil will be immature, despite a brief rebound in US banks last night. Asian markets have so far been quite resilient, but more headwind is likely should the turmoil continue to unfold," said Glenn Yin, head of research and analysis at AETOS Capital Group.
Keep updated, follow The Business Standard's Google news channel
Hong Kong's leader John Lee said he was confident the Credit Suisse situation would not affect the financial hub in a significant way, in line with other regional economies.
The Indonesian rupiah held steady, while the Philippine peso slipped and the Singapore dollar fell 0.2%.
Additionally, the Fed is expected to hike interest rates by 25 basis points on Wednesday.
Before the banking turmoil, many market participants had been factoring in a 50 basis points (bps) interest rate hike.
Fed funds futures now point to a 28.4% probability of the central bank holding its overnight rate between 4.5% and 4.75%, and a 71.6% likelihood of a 25 bps increase, according to CME's FedWatch Tool.
"I think the key focus could be on the Fed speech after the decision. A hike of 25 bps plus a dovish speech may be the best outcome for both the central bank and banks," Yin said.
"If we do get a dovish signal from Powell, then we may see emerging Asian currencies bouncing back due to weakness in the greenback," he added.
In the region, the Thai baht depreciated about 0.6%, snapping a three-day rally of gains. The country dissolved its parliament on Monday to clear the way for an election in May which is set to reignite a long-running power struggle between a military-backed establishment and a political movement that has dominated elections for two decades.
Stocks in Thailand, however, rose in step with its regional peers.
The Chinese yuan, too, flatlined after weakening in the earlier part of the session reacting to rate hike possibilities by the Fed which would have widened yield differentials and capped gains in the currency.
