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Week Ahead for FX, Bonds: Fed to Start Cutting -2-


Week Ahead for FX, Bonds: Fed to Start Cutting -2-

On Tuesday, Singapore will release data on non-oil domestic exports for August, which will show how the open economy's trade is faring midway through the third quarter.

Market participants will be watching to see if exports have remained in growth territory from July, with the key electronics sector an area of focus.

TAIWAN

Taiwan's central bank makes its rate decision Thursday against a backdrop of efforts to cool the property market as it keeps a watchful eye on inflation.

After surprising markets with a rate hike in March to guard against inflation risks, the Taiwanese central bank has since held rates steady as the island economy benefits from exports-led growth. For many analysts, the March hike seems to be a case of one and done.

Goldman Sachs analysts expect the central bank to maintain a neutral policy stance for some time, noting comments from the bank's governor saying that the timing of rate cuts will depend entirely on inflation.

INDONESIA

Indonesia's central bank could be set to start its policy pivot Wednesday.

A backdrop of softer domestic economic growth and cooling inflation, plus the Fed's own expected pivot, have some analysts seeing a clearer path for cuts in Indonesia. Bank Indonesia's governor has been hinting at room for cuts in the fourth quarter but also stressed that its focus for the third quarter is on cementing the rupiah's stability.

That has some other analysts wondering if it will continue to wait for the Fed's dust to clear before making a move. ANZ expects Bank Indonesia to keep its policy rate unchanged, though it thinks the decision will be a close call.

MALAYSIA

Malaysia will publish exports data for August on Thursday. Economists expect export growth last month to be significantly lower than in July but still in the mid-single-digit range, partly due to last August's contraction.

Continued strength in Malaysian exports will add to signs that the economy is on firm footing, supporting expectations that full-year growth will show a solid recovery.

AUSTRALIA & NEW ZEALAND

In Australia, bond traders will focus on the release of August employment data Thursday, with any sudden rise in the jobless rate likely to quickly reshape bets on the next move in interest rates.

The Reserve Bank of Australia has indicated it believes conditions in the job market remain tight overall, and is forecasting a gradual rise in unemployment over coming months. If the upward trajectory of the unemployment rate gathers pace, talk of an interest-rate cut before the end of the year may gain traction.

In New Zealand, economic growth data for the second quarter on Thursday is set to confirm that the economy is in the doldrums, supporting forecasts that the Reserve Bank of New Zealand will likely cut the official cash rate aggressively over coming months.

Most economists are expecting a sizable contraction in the economy over the quarter, extending a lengthy recession.

Any references to days are in local times.

--Additional reporting by James Glynn, Amanda Lee, Kimberley Kao, Grace Zhu, Ying Xian Wong, Megumi Fujikawa, Emese Bartha, Miriam Mukuru, Renae Dyer and Dominic Chopping

Write to Jessica Fleetham at [email protected] and Fabiana Negrin Ochoa at [email protected]

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