BENGALURU (Jan 26): The Philippine peso held onto early gains on Thursday (Jan 26) after the country posted its fastest annual economic growth in more than four decades, while other Asian currencies strengthened against a weaker US dollar.

The Philippine economy grew at a stronger-than-forecast annual rate of 7.2% in the fourth quarter due to pent-up demand following the lifting of Covid-19 restrictions.

"The above-consensus GDP growth in 2022 should give the Bangko Sentral ng Pilipinas space to tighten policy further in the first half of 2023," said Nicholas Mapa, a senior economist with ING.

"There is a need to move cautiously in an uncertain environment with the lagged effects of the aggressive tightening delivered so far," UOB analysts said.

The peso was last up 0.26%, rising 2.3% so far this year.

The Thai baht firmed 0.3%, a day after the Bank of Thailand lifted interest rates as expected while noting the improving growth outlook and rising concerns over demand-side inflationary pressures.

"The better growth outlook and the rising risk of demand-pull inflation would encourage the MPC (Monetary Policy Committee) to shift the policy weights to curbing inflation," BofA analysts said in a note.

The Malaysian ringgit gained 0.3%.

"China's rapid reopening is also increasing optimism for the MYR, given Malaysia's large trade position with China," Maybank analysts wrote.

The dollar index held near an eight-month low against its peers as traders awaited preliminary fourth-quarter US GDP figures later in the day and a slew of central bank meetings next week.

Downbeat earnings and guidance from US corporates have deepened fears of an economic downturn and led investors to pare back expectations on how much longer the Federal Reserve would need to raise interest rates aggressively.

The Singaporean dollar rose 0.1%, while Indonesia's rupiah firmed 0.1% and the Japanese yen advanced 0.2%.

Singapore's December core inflation edged past expectations on Wednesday, but analysts at BofA "see little need for off-cycle move as core forecast remains credible".

Asian equities notched a fresh seven-month high, with Hong Kong shares playing catch-up to other markets' gains as trade resumed after a three-day Lunar New Holiday.

TD Securities analyst Mitul Kotecha expects emerging market assets to outperform in the coming months due to "cheaper valuations, softer USD, peak Fed rates pricing, lower UST yields and China reopening".

Seoul shares climbed 1.7%, with automakers leading the gains ahead of their earnings releases, while Jakarta shares rose 0.4% and Singapore stock benchmark gained 0.6%.

Kuala Lumpur and Philippine shares were down 0.2% each, while Thai shares fell 0.3%.