Most emerging Asian currencies were broadly weaker on Friday against a stronger dollar buoyed by a hawkish U.S. Federal Reserve, but the Philippine
Most emerging Asian currencies were broadly weaker on Friday against a stronger dollar buoyed by a hawkish U.S. Federal Reserve, but the Philippine peso outperformed.
While central banks in Taiwan, Indonesia and the Philippines all increased interest rates on Thursday, the rupiah IDR= and the Taiwan dollar TWD=TP were down 0.2% and 0.3%, respectively, with only the peso managing to eke out gains of 0.2%.
China’s yuan CNY=CFXS fell 0.3% to its lowest in more than two years.
Bank Indonesia’s (BI) rate hike on Thursday was more than expected, while Taiwan’s central bank increased its policy rate for the third time this year and the Philippine central bank delivered its fifth rate rise of 2022, with half a percentage point hike in step with expectations.
Global risk appetite was sluggish after the U.S. Federal Reserve delivered its third 75 bps rate hike this year, signalled further hikes and warned of dwindling confidence in the U.S. economy’s soft landing.
“We reckon that the BSP (the Philippine central bank) may have to keep up with another 50 bps increase to 4.75% in November, and possibly follow up with another 25 bps to 5% in the final meeting of the year,” Chua Han Teng, economist at DBS, said in a note.
With more rate hikes in the offing, the peso may not be able to hold firm, said analysts.
The prospect of a higher terminal rate from the Fed in the face of entrenched inflation would potentially weigh further on the peso, DBS’ Teng said.
The Fed’s projections for aggressive hikes have pushed U.S. treasury yields higher and triggered another round of dollar buying, driving the greenback to near two-decade highs and weighing on riskier Asian assets.
“The big macro factor that is driving markets right now is a strong dollar,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“And so, it doesn’t matter if there is some differential effect due to rate hikes…in the grand scheme of things, we are in a very macro dominated market right now, and it’s not really paying much heed to what’s happening with the domestic policies of individual countries,” Tan said.
Asian stocks were poised for the fourth consecutive weekly drop, with equities in Singapore .STI and Taiwan .TWII down more than 1.1% each, while stocks in Seoul .KS11 tumbled over 2%.
The Malaysian ringgit MYR=, which is down nearly 9% on the year, shed 0.2% on Friday.
Malaysia will not impose capital controls or peg the ringgit to the U.S. dollar, the central bank said on Friday, as the currency trades near a 24-year low.
Malaysia’s consumer price index (CPI) rose 4.7% from a year earlier in August, in line with expectations, government data showed on Friday.
Meanwhile, the Indian rupee INR=IN was down 0.1%, paring losses after sinking to a record low, while shares in Mumbai .NSEI fell 1.3%, on track for their second straight weekly loss.
The Reserve Bank of India likely sold dollars via state-run banks on Friday after the rupee extended losses to hit a record low, three traders told Reuters.
HIGHLIGHTS:
** Singapore’s key consumer price gauge rose 5.1% in August, slightly more than forecast, driven by larger increases in the prices of services and food, official data showed
** Indonesian 10-year benchmark yields ID10YT=RR are up 9 basis points at 4.343%
Asia stock indexes and currencies at 0723 GMT
COUNTRY
FX RIC
FX DAILY %
FX YTD %
INDEX
STOCKS DAILY %
STOCKS YTD %
Japan
JPY=
+0.12
-19.06
.N225
-0.58
-5.69
China
CNY=CFXS
-0.35
-10.54
.SSEC
-0.66
-15.15
India
INR=IN
-0.10
-8.17
.NSEI
-1.31
0.26
Indonesia
IDR=
-0.13
-5.22
.JKSE
-0.41
9.24
Malaysia
MYR=
-0.20
-8.96
.KLSE
-0.62
-8.76
Philippines
PHP=
+0.22
-12.63
.PSI
-0.67
-12.12
S.Korea
KRW=KFTC
+0.03
-15.65
.KS11
-1.81
-23.09
Singapore
SGD=
-0.18
-5.06
.STI
-1.14
3.27
Taiwan
TWD=TP
-0.25
-12.64
.TWII
-1.16
-22.51
Thailand
THB=TH
+0.09
-10.57
.SETI
-0.35
-1.10
Source: Reuters (Reporting by Riya Sharma in Bengaluru; Editing by Dhanya Ann Thoppil)
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