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Asia stocks, forex drop on Fed rate cut talks

Asia Pacific stocks

MSCI’s gauge of emerging markets stocks shed 0.3 per cent, while a basket of currencies lost 0.2 per cent against the dollar

Assets across emerging markets had a weak start on Monday after cautious comments from U.S. Fed policymakers weighed down on market expectations of a dovish stance from the central bank.

MSCI’s gauge of emerging markets stocks shed 0.3 per cent, while a basket of currencies lost 0.2 per cent against the dollar by 0930 GMT.

Both the stocks and currencies indexes had posted weekly gains as the Federal Reserve kept interest rates steady on Wednesday and indicated likely rate-cuts in 2024.

However, the rally was short-lived as the risk sentiment faded after Federal Reserve Bank of New York President John Williams said on Friday that it is too soon to discuss cutting the central bank’s interest rate target.

The dollar eased 0.2 per cent against a basket of currencies, having shed 1.3 per cent last week.

The dollar is recovering after the pushback from Fed officials against rate cut bets. Nevertheless, the dovish Dot Plot may work as an anchor for rates and keep the dollar soft into the end of December, Francesco Pesole, FX strategist at ING, said in a note.

Most Asian stocks slipped, with Hong Kong shares leading declines of around 1 per cent.

Chinese banks are putting bad loans up for sale at a record pace as regulators push for faster disposal of sour debts amid increasing consumer defaults during an ailing post-COVID economic recovery.

China’s yuan slid 0.2 per cent to 7.1313 per dollar as weak economic fundamentals dragged on sentiment, outweighing benefits from exporters’ dollar sales towards the end of the year.

In Europe, Czech’s crown was steady against the euro after data showed producer prices for November increased 0.8 per cent on an annual basis missing forecasts of a 1.0 per cent rise.

The Hungarian forint touched a near-two-month low and was 0.4 per cent down against the euro ahead of a monetary policy decision on Tuesday, where the country’s central bank is expected to cut interest rates by 75 bps.

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