2025-09-18 05:38

Sept 18 (Reuters) - Asian bonds attracted their first monthly foreign inflow in three months in August, as expectations of U.S. Federal Reserve rate cuts to support a cooling labour market boosted demand for higher-yielding emerging markets. Non-native investors bought Asian bonds worth a net $311 million last month, their first monthly net purchase since May, data from regulatory authorities and bond market associations in India, Indonesia, Thailand, Malaysia and South Korea showed. Sign up here. The Fed cut interest rates on Wednesday for the first time since December, citing rising risks to the labor market, and signaled further reductions ahead as unemployment edges higher, work hours shrink, and other signs of weakness emerge. "We expect a cumulative rate cut of 125bp, taking the Fed funds rate to 3.25% by March 2026," said Khoon Goh, head of Asia research at ANZ. "A more accommodative US monetary policy stance should support Asia ex-China currencies and asset markets," Goh said. Investors bought Indian bonds of $773 million and Malaysian debt instruments of $721 million last month, snapping a two-month selling trend in both these markets. South Korean, Indonesian and Thai bonds, however, saw foreign outflows of $447 million, $400 million and $337 million, respectively, last month. https://www.reuters.com/world/china/foreigners-snap-up-asian-bonds-august-after-two-month-hiatus-2025-09-18/

2025-09-18 05:34

12 analysts' median forecast is for BI's benchmark of 4% in 2026 Governor Warjiyo sounded more dovish, economist says Deeper cut for overnight rate is first since 2016 Rupiah down 0.5% by midday break JAKARTA, Sept 18 (Reuters) - Several economists said on Thursday that they expected more aggressive easing by Indonesia's central bank after this week's surprise rate cut, with many noting the governor's determination to boost growth in Southeast Asia's biggest economy. All 31 economists polled by Reuters had expected Bank Indonesia to stand pat, but the central bank on Wednesday cut its benchmark rate again (IDCBRR=ECI) , opens new tab by 25 basis points to 4.75%, against the backdrop of growing investor concerns about the country's fiscal discipline and the bank's independence. Sign up here. The rupiah fell 0.5% against the U.S. dollar by midday break on Thursday, responding to BI's unexpected move as well as the Federal Reserve's rate cut. The stock index (.JKSE) , opens new tab hit a fresh all-time high on positive growth prospects. BI has now reduced its main interest rate by 150 bps in an easing cycle that started in September 2024 and has also included liquidity loosening and government bond purchases in the secondary market. Twelve economists said they now expect more cuts in light of Wednesday's easing, many of them adding new trims into their outlook, taking the median forecast to 4% by 2026. Before BI's decision, a bigger pool of 21 economists surveyed by Reuters had expected a terminal rate of 4.50% by next year. "Governor Perry Warjiyo sounded notably more dovish than previous meetings, stating that (commercial) bank interest rates need to go down 'immediately', adding that BI continues looking for room to further lower interest rates," Maybank's Brian Lee said. Maybank now expects BI to slash its benchmark rate by another 125 bps by 2026, bringing it to 3.50%, compared to its previous forecast of 4%. Lee also underlined Warjiyo's comments about BI working together with the government to support economic growth, following its agreement to help fund some government programmes. Barclays' economist Brian Tan predicts BI will bring down the benchmark to 4.25% this year, with even more cuts likely due to BI's "all out pro-growth" stance. Barclays' previous forecast was a terminal rate of 4.75%. Part of Wednesday's surprise was BI's decision to cut the deposit facility rate (IDCBID=ECI) , opens new tab even deeper by 50 bps to 3.75%, while also cutting the lending facility rate (IDCBIL=ECI) , opens new tab by 25 bps to 5.50%. Both rates serve as the floor and ceiling of overnight interbank money market rates. This marked the first time since 2016 that BI will manage what economists called an "asymmetric corridor" for money market rates. Citi Research's analyst Helmi Arman said the decision is likely linked to the government's policy to move more than $12 billion of its funds from BI to state banks, adding liquidity into the banking system. Citi kept its outlook for BI's terminal rate at 4.25%, but brought forward its expectations of the timing to the fourth quarter. It had previously expected BI to spread out the cuts until the first quarter of 2026. (This story has been corrected to change Maybank's previous rate forecast to 4%, not 4.25%, in paragraph 8) https://www.reuters.com/world/asia-pacific/market-expecting-more-easing-after-surprise-indonesia-central-bank-cut-2025-09-18/

2025-09-18 05:31

MUMBAI, Sept 18 (Reuters) - The Indian rupee slipped on Wednesday, pressured by a firmer dollar and higher U.S. Treasury yields after the Federal Reserve's widely expected 25 basis points cut left investors parsing mixed signals from its projections and commentary. The rupee was down 0.3% at 88.0650 against the U.S. dollar, in line with weakness among regional peers and halting a four day streak of gains. Sign up here. The dollar was up 0.2% at 97.2 against a basket of major currencies even though it had hit a 3-1/2-year low in the immediate aftermath of the Fed's policy announcement. The U.S. central bank expectedly cut interest rates by 25 basis points on Wednesday but Fed Chair Powell characterised action as a risk-management cut which splintered from the dovish tilt expressed in policymakers' dot-plot interest rate projections. While analysts at ANZ characterised the Fed Chair's press conference remarks "as balanced and restrained, and not at all dovish," their counterparts at Goldman Sachs noted that " many hints at today’s meeting pointed to today’s cut being the first of a series of consecutive cuts." For the rupee, the differing interpretations sparked a slip below the 88/USD mark, a day after the local currency touched its strongest level since late-August. Traders pointed to broad-based dollar buying interest from both local and foreign banks which exerted pressure on the rupee on Wednesday. India's benchmark equity indexes, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab were upp about 0.4% each while the yield on the benchmark 10-year bond ticked up 3 bps to 6.50%. Elsewhere, the Bank of England is expected to keep policy rates unchanged on Thursday and the decision precedes a no change in benchmark rates expected from the Bank of Japan on Friday. https://www.reuters.com/world/india/rupee-dips-below-88usd-investors-get-mixed-signals-fed-cut-2025-09-18/

2025-09-18 05:31

Fed's guidance leads to dollar's initial plunge, then rebound Fed Chair Powell describes rate cut as risk-management measure NZ dollar slides after sharp GDP slowdown fuels rate cut bets BoE expected to refrain from raising rates amid heated inflation TOKYO, Sept 18 (Reuters) - The U.S. dollar ticked higher on Thursday following its plunge to a 3-1/2-year low and then forceful rebound as traders grappled with the ramifications of the Federal Reserve's measured stance on further interest rate cuts. New Zealand's dollar tumbled after data showed the country's economy shrank far more than expected in the second quarter, fuelling bets of steeper rate cuts this year. The Aussie dollar also weakened after the Australian employment unexpectedly declined in August. Sign up here. The Fed reduced rates by a quarter point on Wednesday, as expected, and indicated it will steadily lower borrowing costs for the rest of this year. Fed Chair Jerome Powell characterised the day's policy action as a risk-management cut in response to the weakening labour market, but said the central bank does not need to rush easing. The dollar dropped to the lowest since February 2022 at 96.224 against a basket of major peers immediately after the rate decision, but sprang back vigorously to be as much as 0.44% higher on the day at 97.074. It continued that climb on Thursday to stand at 97.163. The Fed's closely watched dot plot of policy expectations predicted a median 50 basis points of additional cuts over the remaining two policy meetings of this year, but only one additional reduction in 2026. "The revised forecasts highlighted the degree of uncertainty that remains over the outlook," said Elliot Clarke, head of international economics at Westpac. "The timing and scale of the forecast rate cuts also point to lingering risks for inflation." The euro slipped 0.2% to $1.1791, after a round trip to the highest since June 2021 at $1.19185 on Wednesday in a knee-jerk reaction to the Fed announcement. Sterling eased 0.2% to $1.3604 after briefly leaping to the highest since July 2 at $1.3726 in the prior session. The Bank of England announces its own policy decision later on Thursday, and is widely anticipated to keep rates at 4%. Official figures on Wednesday showed British inflation at an annual 3.8% in August, reinforcing market expectations that further rate cuts are unlikely to be imminent. Economists polled by Reuters earlier this month expect one more rate cut by the end of the year. YEN SLIPS AHEAD OF BOJ RATE DECISION The dollar advanced 0.2% to 147.245 yen in the latest session, after weakening as much as 0.67% to the lowest since July 7 at 145.495 yen overnight before slingshotting back. The Bank of Japan is widely expected to refrain from hiking rates on Friday, although markets price in a quarter-point increase by end-March, with about 50% odds of it happening within this year. The spotlight is on an October 4 vote where the ruling Liberal Democratic Party will elect a new leader to replace outgoing Prime Minister Shigeru Ishiba, who is stepping down following a bruising defeat in upper house elections. New Zealand's dollar weakened 0.9% to $0.5909, the lowest level since September 8. Data on Thursday showed gross domestic product (GDP) fell 0.9% in the second quarter from the prior quarter, worse than analysts' and the Reserve Bank of New Zealand's forecasts of a 0.3% fall. Westpac changed its call for the RBNZ's meeting next month to a half-point cut from a quarter-point reduction. The Aussie dollar declined 0.4% to $0.6628 after official figures showed net employment fell by 5,400 in August on a month-on-month basis, compared with market forecasts of a 21,500 gain. The greenback added 0.1% to C$1.3790 after the Bank of Canada on Wednesday cut rates by a quarter point to a three-year low, as expected, citing a weak jobs market and less concern about underlying pressures on inflation. https://www.reuters.com/world/middle-east/dollar-firms-after-post-fed-rollercoaster-ride-nz-dollar-sinks-2025-09-17/

2025-09-18 05:04

HONG KONG, Sept 18 (Reuters) - Hong Kong's central bank on Thursday lowered its base interest rate by 25 basis points to 4.50%, tracking a cut by the U.S. Federal Reserve. It was the first easing by the Hong Kong Monetary Authority since a 25 basis point cut last December. The rate is charged via the overnight discount window. Sign up here. Major Hong Kong banks partially followed, with HSBC 0005.HK lowering its Hong Kong dollar best lending rate by 12.5 bps to 5.125% effective September 19, and Bank of China (Hong Kong) also reducing its Hong Kong dollar prime rate to 5.125% from 5.25%. Hong Kong's monetary policy moves in lock-step with the United States as the city's currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar. "We believe the adjustments announced today are appropriate considering the U.S. rates decision and the local market conditions," Luanne Lim, Chief Executive Officer, Hong Kong, HSBC, said in a statement. "We will continue to monitor the external environment and local economic outlook, and adopt an agile approach when we evaluate future rate decisions," Lim added. HKMA Chief Executive Eddie Yue said the reduction will have a positive impact on the city's property market and economy, noting that financial and monetary markets continue to operate in a smooth and orderly manner. The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs for the rest of this year. Yue said the Fed might cut rates further by 50 bps before the end of the year, though he added that "the extent and pace of future U.S. interest rate cuts are subject to uncertainty". https://www.reuters.com/world/asia-pacific/hong-kong-central-bank-cuts-interest-rate-tracking-fed-banks-follow-2025-09-17/

2025-09-18 05:01

Fed tempers dovish tilt as inflation remains sticky Investors cautious on risk assets amid stagflation threat Market reaction muted to first rate cut since December Disagreement within Fed expected to add to volatility NEW YORK, Sept 18 (Reuters) - Investors look set to face a volatile few months ahead after the Federal Reserve resumed interest rate cuts and opened the door to further easing but tempered its message with warnings of sticky inflation, sowing doubt over the pace of future policy adjustments. Some investors are now less certain that a rapid shift to lower borrowing costs will materialize, potentially dampening optimism that stocks and bonds would get a strong lift from easier policy. Adding to the uncertainty was a wide variety of views within the Fed on the future path of rates. Sign up here. “We've had a rather cautious, not necessarily fully defensive... view here for a while," which was "reinforced" by the Fed's message, said Larry Hatheway, global investment strategist at the Franklin Templeton Institute. Hatheway added that many in the market would likely be slightly disappointed at the lack of clarity and direction from the Fed, which stopped short of endorsing market expectations for a clear string of rate cuts, emphasizing a meeting-by-meeting, data-dependent approach. At Wednesday's meeting, the Fed lowered its policy rate by 25 basis points to a range of 4%-4.25%, its first cut since December, and signaled a gradual easing cycle in response to mounting labor market concerns. At the same time, Fed Chair Jerome Powell highlighted "a challenging situation" for policymakers, noting that risks to inflation were tilted to the upside and risks to employment to the downside. The comments dampened market optimism despite a much hoped-for dovish shift after recent data that showed unemployment climbing to 4.3% in August and payrolls growing far less than expected. A steep downward revision to benchmark jobs figures for the year through March also recently added weight to the view that the labor market is losing steam, bolstering the case for multiple rate cuts ahead. The U.S. central bank's release on Wednesday of updated quarterly economic projections, including rate forecasts issued in a chart known as the "dot plot", reflected expectations of more easing this year when compared to the 'dots' from the June meeting, with 50 basis points in cuts seen before year end. At the same time, the Fed's projections still put inflation ending this year at 3%, well above the central bank's 2% target, while its projection for economic growth was slightly higher at 1.6% versus 1.4%. "Markets may welcome the easing bias, but the messaging remains nuanced and far from a full pivot," said Dan Siluk, head of global short duration and liquidity, and a portfolio manager at Janus Henderson Investors. The Nasdaq and the S&P 500 had gone into the meeting close to record highs, but closed lower in choppy trading on Wednesday. Treasury yields, which move inversely to bond prices, rose, with two-year yields up four basis points on the day at 3.55% and benchmark 10-year yields up by about seven basis points to 4.09%. The yield curve had been flattening in recent weeks, with the gap between long-dated and short-dated yields decreasing on expectations of rate cuts. "The Fed is in a tough spot," said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. "They expect stagflation, or higher inflation and a weaker labor market. That is not a great environment for financial assets." STAGFLATION RISKS LINGER U.S. consumer prices increased by the most in seven months in August amid higher costs for housing and food, resulting in the biggest year-on-year increase in inflation since January. Combined with softening labor market conditions, higher inflation has sparked fears of stagflation - a worrying mix of sluggish growth and high inflation that haunted the U.S. in the 1970s and that could complicate the Fed's ability to support the jobs market with hefty rate cuts. "This is far from the stagflation of the 1970s, but at the margin argues for a more conservative outlook for returns on stocks and bonds," said Michael Rosen, chief investment officer at Angeles Investments. The Fed's shift to easing on Wednesday was also being scrutinized after relentless pressure from U.S. President Donald Trump's administration on the Fed to cut rates. Stephen Miran, Trump’s nominee and economic adviser, was sworn in to the Fed's Board of Governors on Tuesday and registered the lone dissent to the Fed's quarter-point cut decision, instead arguing for a bigger half-point reduction. Markets were also left to contend with the Fed’s 'dot plot' showing a wide variety of forecasts, with one participant penciling in a 4.4% year-end rate, above the new 4.00%–4.25% range. At the other end, one policymaker marked down a year-end policy rate of 2.9%. "I think the market was having trouble digesting all the information they got. Certainly, it did not give anyone a tremendous line of sight" into how Fed policymakers are approaching decision-making, said Josh Hirt, senior U.S. economist at Vanguard. "There is such disagreement amongst the committee members that there is some heightened uncertainty," Hirt added, and greater volatility "is one potential consequence of this increased number of different cross currents." https://www.reuters.com/world/us/feds-rate-cut-comes-with-caveats-leaving-investors-lukewarm-2025-09-18/