Philippine peso, Indonesian rupiah top gainers; Asian stocks slide

Most Asian currencies firmed against a weak dollar on Friday, with the Philippine peso and the Indonesian rupiah leading gains, while stocks fell as dull U.S. manufacturing activity data reaffirmed the possibility of higher interest rate hikes.

The Philippine peso USDPHP, which lost 8.5% so far this week, appreciated 0.9% in its fifth session of gains, after the central bank said it will hike interest rates this month, although the board could likely be split over the quantum of the hike.

The Philippine benchmark PPSEI emerged as the top loser across Asia, tumbling 3.6% and on track for its worst week in nine as prospects of further monetary tightening sapped risk sentiment.

Analysts at Barclays expect "significant monetary policy tightening" to hurt growth next year with a lag, forecasting a 4.5% growth in 2023, down from 6.6% seen this year as inflationary pressures and macro headwinds bite.

Separately, the Philippines' central bank governor voiced caution over the transparency of a potential sovereign wealth fund, which will serve as another source of liquidity for development projects and expected to be overseen by President Ferdinand Marcos Jr.

In Indonesia, rupiah USDIDR extended gains to a third day with a nearly 1% jump. The unit was poised for its best week since November 2020 after inflation data on Thursday showed some signs of cooling, but stayed above the central bank's target range of 2% to 4%.

The Malaysian ringgit firmed 0.2%, adding nearly 2% in value this week, while stocks BURSA dropped 0.7% and snapped a two-day winning streak.

Markets are looking forward to an update on cabinet line-up later in the day from Prime Minister Anwar Ibrahim, who was appointed as premier by the country's king last week after an election saw no winning candidate.

Stocks in Jakarta COMPOSITE lost 0.1%, tracking their worst week since mid-October.

To tame inflation, which is near its highest rate in seven years, Bank Indonesia (BI) has lifted interest rates by a total of 175 basis points this year, stating that further moderate rate hikes will be needed to bring it under control.

"We reduce our 2023 CPI forecast to 3.3% from 3.9%, but still expect another rate hike in December – our base case is 25 bp (basis points) but the risk of 50 bp is significant – followed by two 25bp increases in the first quarter of 2023," said Brian Tan, an analyst at Barclays.

BI will release its seven-day reverse repo rate decision on Dec. 22.

Other currencies across the region clocked gains as well, with Thailand's baht USDTHB, India's rupee USDINR, and the Singaporean dollar USDSGD each edging 0.1% higher.

Stocks in Asia, however, were subdued. India NIFTY, South Korea KOSPI and Thailand SET markets retreated between 0.2% and 1%.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields falls 0.9 basis points to 6.847%

** South Korea Nov inflation slows to 5.0%, lowest in 7 months

** Nov ISM U.S. Manufacturing Activity Index 49.0 Vs 50.2 In Oct