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The relatively lighter week ahead could see the markets quieten into the end of the year.
US dollar strength
The theme of improved US outlook has certainly been the factor underpinning the elevated stock prices lately for Wall Street. The latest Fed FOMC further reinforced this optimism with the committee’s dot plot signaling three rate hikes for the year of 2017, accelerating from the mere two in the previous update.
For emerging Asia, the pressure continues to stem from the US dollar strength with the USD index last seen hanging at 103.00 levels after printing a close to 14-year high. The week ahead will have the markets closely monitoring developments in this arena. Economic indicators including November existing home sales, durable goods orders, personal income and spending will be data events to watch for. Most notably, the third and final estimate Q3 GDP will be due on Thursday. The current figure rests at 3.2% QoQ and significant surprises on the upside could fuel further extension for the USD and weigh on emerging Asian currencies.
Bank of Japan meeting
The highlight for Asia in the week ahead will be the Bank of Japan (BoJ) meeting. The market is widely expecting no change for the upcoming meeting with the BoJ likely to stick to their negative interest rate policy rates and continue targeting the 10-year government bond yield. There have however been reports suggesting that the BoJ could upgrade the economic view in the coming week that could further boost the uphill climb for the USD/JPY pair. This is no surprise for the market with the weaker JPY injecting a much-needed stimulus for the export-oriented sectors.
Preceding the BoJ interest rate decision will be the November trade balance. As things stand, the market consensus is expecting improved trade conditions for Japan.
For Asia, we are anticipating a series of indicators and central bank meetings. The Bank of Thailand (BoT), Banko Sentral ng Pilipinas (BSP) and Taiwan’s CBC will announce their interest rate decisions in the following week. Amidst the divergent monetary policy in the west, these central banks are expected hold rates unchanged.
Other data to watch for in the markets includes South Korea and Malaysia’s November interest rates. For the local market, it will be a double shot of November’s inflation index and industrial production, the latter a point of interest following the strong non-oil domestic exports data from this week.