Asian emerging currencies were subdued on Tuesday as recession concerns curbed risk taking and buoyed the dollar, while the Indonesian rupiah fell ahead of a central bank policy meeting.
Bank Indonesia (BI), one of a few major Asian central banks that has yet to begin monetary policy tightening, is expected to leave rates unchanged at record lows on Tuesday.
“Plans to increase the cost of subsidised fuel have been floated around and should this be implemented, we believe it could be a trigger for BI to finally raise rates by the end of 3Q22,” analysts at ING said in a note.
The country has tripled its subsidy budget this year to keep prices of gasoline, diesel and some power tariffs unchanged.
The huge subsidy bill has helped keep inflation relatively low.
Indonesia’s rupiah, which has fallen 4.5% so far this year, weakened 0.1% to hit its lowest in two weeks.
Concerns over global growth persisted on an aggressive US Federal Reserve policy view and after a renewed spike in European energy prices stoked recession fears.
Indonesia rupiah hits two-month high among mixed Asian FX
The dollar index firmed 0.1% bolstered by the growing possibility of a hawkish message from the Fed’s Jackson Hole symposium later week.
The Singapore dollar was 0.1% firmer and the benchmark index 0.6% lower after the city-state’s key consumer price gauge rose 4.8% in July, its fastest pace in more than 13 years.
A Reuters poll estimated July core inflation of 4.7% year-on-year.
The country’s core and headline inflation figures will provide further cues to the Monetary Authority of Singapore’s (MAS) stance on tightening policy.
“The lack of any signs of inflation peaking thus far may keep the MAS’ tightening stance intact as we inch closer to the October meeting,” Yeap Jun Rong, a market strategist at IG said in a note.
Crude prices slid overnight and weighed on Malaysia, a net exporter of oil.
The ringgit pared earlier losses and was flat around 0448 GMT, while equities in Kuala Lumpur declined 0.5%.
Among other Southeast Asian currencies, Thailand’s baht fell 0.3%, its lowest in more than two weeks.
South Korea’s won fell 0.1%, its weakest since April 2009. Stocks in Seoul dropped 0.9% and were on track for their longest losing streak in two months.
All but one of 36 economists polled by Reuters forecast the Bank of Korea will raise its policy rate by 25 basis point (bps) at its meeting on Thursday.
One expected a 50 bps hike.
Highlights:
** India’s benchmark 10-year yields rise 3.5 points to 7.305% ** Malaysia’s exports of palm oil products for August 1 to August 20 fell 0.8%
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