Asian currencies dipped in holiday-thinned trading on Friday, and were on course for weekly losses, as the increased probability of an interest rate hike by the US Federal Reserve at its next meeting continued to weigh on sentiment.
The South Korean won – Asia’s worst performing currency this year – declined a further 2.3% this week in its biggest weekly drop since mid-February.
Thailand’s baht and Singapore’s dollar also dipped on Friday and were poised for weekly losses.
Asian markets have largely been subdued this week, with the lack of significant triggers keeping trading confined to narrow ranges.
Rising expectations that the Fed will raise interest rates by 25 basis points in May have lent some support to the greenback, which was last trading up 0.03% at 101.81.
Money markets are now pricing in a nearly 86% chance the Fed will hike rates by 25 basis points next month, compared to a 69% chance last week.
This likelihood of an interest rate hike in May was further reinforced by Fed speakers overnight.
Investors are assessing the path for interest rates, and many expect a slowing US economy could lead the Fed to start cutting rates later this year as the central bank juggles its fight against inflation.
“FX markets have been largely trading range-bound in absence of fresh catalyst as markets continue to weigh growth risks and tightening path,” OCBC strategists wrote in a note.
Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting the labour market was gradually slowing.
Most Asian currencies inch lower on odds of Fed rate hike
Back in Asia, shares in Seoul fell 0.7% and were set for their first weekly loss in six. The country’s exports for the first 20 days of April fell 11.0%, dragged down by China-bound shipments.
A new member of the country’s central bank’s policy board has said the economy is experiencing difficulties after rapid rate hikes and needs monetary policy appropriate for the domestic situation.
Equities in Singapore and Bangkok also declined. Markets in Indonesia and Malaysia were closed for the day.
China’s blue-chip CSI 300 Index fell 1.1%, while the Shanghai Composite Index dropped 1.1% in its biggest single-day drop in five-weeks.
Meanwhile, Chile’s President Gabriel Boric said he would nationalize the country’s lithium industry, the world’s second largest producer of the metal.
Highlights
** South Korea April 1-20 exports fall 11% y/y - customs agency
** Biden to meet Philippine President at White House on May 1
** Japan’s “core-core” CPI up 3.8% yr/yr, hits highest since December 1981
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