Philippine stocks climbed nearly 2% on Friday and the Indonesian rupiah rose for a third session, leading gains in emerging Asian markets as easing U.S. inflation bolstered hopes of the Federal Reserve slowing its pace of interest rate hikes.
The rupiah strengthened as much as 1.3% to its highest in nearly four months. The currency has risen more than 3% so far in the week, tracking its best weekly gain since June 2020.
"There appears to be a pick-up in foreign portfolio inflows into the Indonesian bond market recently and this is related to more positive sentiment for Asia," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8% to a seven-month high and was headed for a third consecutive weekly gain.
Stocks in Manila climbed as much as 1.9% to their highest in more than eight months, while those in Malaysia and Singapore rose 0.2% and 0.5%, respectively.
The US. dollar swayed, having slipped to its lowest since June earlier in the session, after data showed US consumer prices fell for the first time in more than 2-1/2 years in December.
"Market relief is grounded on solidifying evidence of dis-inflation squaring with the Fed approaching the end of its tightening cycle," Vishnu Varathan, head, economics & strategy at Mizuho Bank, wrote in a note.
The U.S. rate futures market has priced in two 25-basis point hikes in the next two Fed meetings. The market also projected that the fed funds rate will peak just below 5% at the June meeting.
Even if inflation may not have peaked in Asia, earlier concerns about a strong U.S. dollar and local currency weakness have eased, RBC's Tan said.
There is now a growing concern about the growth outlook in Asia, which will temper the monetary policy trajectory in the region, Tan added.
Bank Indonesia and Bank Negara Malaysia's policy decisions are due next week. The ringgit firmed as much as 0.6% to touch its highest since April 2022.
Singapore's dollar added as much 0.1% to touch its highest since June 2021 before reversing course to trade lower. The South Korean won appreciated 0.4%, while stocks in Seoul added 0.9%.
The country's central bank raised its policy interest rate by 25 basis points, as expected, but suggested a possible downgrade of this year's economic growth projection and abandoned a formerly regular reference about the need for more rate hikes.
Indonesian 10-year benchmark yields down 6.5 basis points at 6.665%
In the Philippines, top index gainers are Universal Robina Corp and Bank of the Philippine Islands
Data showed China's exports shrank sharply in December as global demand cooled, while imports tumbled again; the yuan retreated 0.1%.