Emerging market currencies and stocks in Asia rose on Friday, tracking a broader recovery after Russia’s invasion of Ukraine sent global assets tumbling in the previous session, although sentiment was still cautious.
The Thai baht and the Indian rupee made a swift recovery against the dollar, with both jumping 0.4 percent each, even as oil prices surged nearly 3 percent.
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However, the baht, which has outperformed all of its emerging Asian peers so far this year, was set for its worst weekly drop in a month.
“I think the baht has now become a barometer of emerging market currencies and its rebound suggests that investors are probably buying the dips,” said Margaret Yang, a Singapore-based strategist with DailyFX.
Analysts expect the volatility seen in Asian stocks during this week to guide the moves in the foreseeable future.
“The main drivers of this volatility – geopolitical tensions and inflation – particularly in energy and commodities and uncertainty about the pace and extent of monetary policy tightening – continue unabated,” said Manishi Raychaudhuri, head of Asia-Pacific equity research at BNP Paribas.
“Therefore, today’s recovery in Asian equities appears to be a technical rebound, in our view.”
Investors will closely watch any moves by the US Federal Reserve as its officials begin taking stock of how the Russia-Ukraine conflict might influence the economy and their planned shift to tighter monetary policy.
“Ukraine or no Ukraine, the US faces inflation that is running at a 40-year high. If inflation continues to print above expectations and run hot, then the Fed may still have to stick with its aggressive path this year. This is what could make trading difficult for Asian emerging markets, both currencies and stock markets,” IG Asia analyst Daniel Dubrovsky said.
Singapore’s dollar firmed 0.2 percent and the South Korean won reversed losses to gain 0.1 percent, while Indonesia’s rupiah and the Malaysian ringgit were up 0.1 percent each.
Asian equities tracked overnight Wall Street gains to jump higher, with Indian shares leading gains.
Shares in South Korea, Singapore, Indonesia and Thailand gained in the range of 0.5 percent to 1 percent, while Malaysian stocks jumped 1.7 percent.
The Singapore index is, however, on track for a 4 percent weekly loss, its biggest drop in more than nine months. Kuala Lumpur shares were headed for their biggest weekly fall since January 28.
European bank shares also rebounded early on Friday from steep falls a day earlier, even as bankers wrestle with the impact of a slew of sanctions following Russia’s invasion of Ukraine.
Shares of leading banks rose with the European banking sector trading up 1.3 percent. That is only a partial recovery from an 8 percent fall on Thursday.