Expect significant new tariffs on Chinese imports and moderate levies on goods from other nations , as President-elect Donald Trump rolls out his protectionist agenda. However, with his preference for chaotic policymaking and sudden shifts , there’s uncertainty on how soon these import taxes will actually hit. Dubbed “ Tariff Man ,” Trump aims to use tariffs both strategically and tactically . He’s mentioned taxing all Chinese goods up to 60% and potentially setting 10%-20% tariffs on imports globally , but details on these plans remain vague . Key players within Trump’s team are divided: Robert Lighthizer , a staunch tariff advocate, sees permanent duties as crucial to balance US trade , while others, like billionaires John Paulson and Scott Bessent , view tariffs as temporary leverage. Trump’s previous administration had mixed feelings, especially on national security-related trade limits , which he sometimes dismissed, favoring an “open for business” approach. High-profile busin
Emerging Asian currencies and stocks saw gains on Wednesday as investors anticipated the US Federal Reserve’s policy decision later in the day. Meanwhile, the yen experienced volatility following the Bank of Japan’s (BOJ) rate hike.
Key Points:
Currency Movements:
- The South Korean won and the Thai baht led currency gains, rising by 0.6% and 0.5% respectively.
- Other Asian currencies like the Singaporean dollar, Philippine peso, and Malaysian ringgit traded flat to 0.3% higher.
US Federal Reserve Decision:
- Investors are keenly awaiting the Fed’s decision, with markets largely expecting the central bank to maintain current interest rates.
- There is significant attention on any commentary regarding a potential rate cut in September.
Bank of Japan’s Rate Hike:
- The BOJ raised its short-term interest rate target to 0.25% and outlined a plan for quantitative tightening.
- This decision caused the yen to fluctuate, initially pushing it to its highest in a week before it pared gains.
Market Reactions:
- “The elephant in the room is JPY (the Japanese yen), which has been highly volatile,” noted Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics.
- Analysts suggest the Fed's potential rate cuts could pave the way for Asian central banks to ease their policy stances.
Equity Markets:
- Most emerging Asian equity markets saw gains. Chinese stocks surged by about 1.9%, driven by investor optimism from a Politburo meeting emphasizing the need to boost consumption.
- Bourses in Thailand, Philippines, Malaysia, and Indonesia traded higher, with gains ranging between 0.1% and 0.8%.
Expectations and Outlook:
- Jonathan Koh, an economist at Standard Chartered, suggested that while some Asian central banks might follow the Fed in cutting rates, the overall interest rate differential may not significantly favor Asian currencies.
- Investors are also watching for inflation data from Indonesia and South Korea this week to assess the stance of their central banks.
Highlights:
- The Reserve Bank of India is expected to hold rates in August, with the first cut anticipated in Q4.
- The Philippines central bank projects July inflation to be between 4.0% and 4.8%.
- China's July factory activity shrank, while services grew at a slower pace.
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