POSITION: LONG THE FXA
Malaysia’s consumer prices climbed 1.3% year-over-year in March, after gaining 1.2% in February. The FTSE Bursa Malaysia Index traded flat last night and is up 5% year-to-date. Consistent with inflation trends across Asia, most Asian central banks are starting to remove the emergency monetary stimulus implemented last year as inflation returns with stronger regional economic growth.
India has raised interest rates twice since Malaysia increased borrowing costs on March 4, and Singapore said this month that it will allow its currency to strengthen.
One of our most admired central bankers, Australia’s Glenn Stevens, takes the prize for the most aggressive round of interest-rate increases and he is balancing the risk of faster inflation against a growing economy. In a speech overnight he said “Our task is now to manage a new economic upswing and this will be just as challenging, in its own way, as managing the downturn.” The central bank’s next meeting is in early May. Next week’s reading on first-quarter inflation will have a big impact on the direction of interest rates in Australia. Last night, the Australian Index was down 0.5% and is marginally higher on the year.