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Asian currencies firm against dollar ahead of Fed

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Most Asian currencies rose on Wednesday,

with the South Korean won leading gains, as caution ahead of the

Federal Reserve’s policy announcement later in the day put the

dollar on the back foot.

The won strengthened 0.6% ahead of the

announcement, while the Philippine peso advanced

marginally. Some local markets like Indonesia, Malaysia and

Thailand were closed for public holidays.

The dollar was slightly lower to flat against a

basket of major currencies around midday in Asia with Fed

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policymakers expected to hike interest rates by 50 basis points

(BPS) later in the day in a bid to tame surging inflation.

“The upshot is that a lot of Fed tightening has been

communicated and already been priced, but there are considerable

uncertainties on where the terminal rate should settle at,

thereby accounting for elevated implied volatility,” analysts at

DBS said in a note.

Local stock markets seesawed ahead of the Fed’s

announcement, with equities in Singapore and South Korea

falling 0.1% and 0.2%, respectively.

Philippine stocks were 0.4% lower after paring losses

from a 1% decline earlier, when it plumbed its lowest level

since August 2021, as investors awaited the country’s inflation

data on Thursday. The country also hits voting booths on May 9

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for presidential elections.

“Although most candidates have expressed the desire to

continue the programs of the incumbent, a relatively high

debt-to-GDP ratio suggests that the eventual Presidential winner

will not enjoy much fiscal space to pursue an aggressive

spending strategy to fulfill campaign promises,” said Nicholas

Mapa, senior economist for the Philippines at ING.

A Reuters poll shows that inflation in April is expected to

come in at 4.6%, within the central bank’s estimate range of

4.2% to 5%.

“The Bangko Sentral ng Pilipinas (BSP) Governor has remained

steadfast in his guidance to keep rates unchanged to support the

economy recovery but he has recently signaled he would be open

to hiking by June,” Mapa added.

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Last week, BSP Governor Benjamin Diokno said the central

bank, which has kept interest rates at a record low of 2% since

November 2020, would consider hiking rates at its policy meeting

in June to keep inflation in control.

Trading activity was thin as major markets Japan and China

were shut.

HIGHLIGHTS:

** Indian 10-year benchmark yields rise 2.3 basis points to

7.142%

** Manila Electric and Globe Telecom led

losses on the benchmark Philippines index to fall 3.7%

and 2.5%

** India has asked state and private sector utilities to

ensure delivery of 19 million tonnes of coal from overseas by

end-June as power woes mount

Asia stock indexes and currencies

at 0413 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.02 -11.5 <.n2>

India +0.13 -2.73 <.ns ei>

Philippi +0.10 -2.79 <.ps nes i>

S.Korea 11>

Singapor -0.04 -2.51 <.st e i>

Taiwan -0.02 -6.25 <.tw ii>

(Reporting by Tejaswi Marthi in Bengaluru; Editing by Sam

Holmes)

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