JAKARTA: The Indonesian rupiah and the South Korean won led losses among Asian currencies on Wednesday as the prospect of U.S. policy tightening supported the dollar, while losses in tech firms pulled down the South Korean benchmark index by more than 1%.
The South Korean KOSPI hit its lowest level in more than four weeks as tech heavyweights tracked overnight losses in Nasdaq, caused by elevated U.S. yields and weak performances in tech shares. Elsewhere, Indonesia and Singapore shares dropped more than 0.5% each.
Regional currencies were pressured by a firmer dollar, which was hovering near a one-week high, ahead of release of the U.S. Federal Reserve’s December meeting minutes, which could provide more clues about the timing of any rate hikes.
The dollar was also supported by rising U.S. Treasury yields as bond investors geared up for interest rate hikes from the Federal Reserve by mid-year to curb the stubbornly high inflation.
“The market focus is generally turned towards the tighter policy outlook, with resilient economic conditions thus far supporting expectations that the path for policy normalisation will remain undeterred ahead,” said Yeap Jun Rong, market strategist at retail trading platform IG.
Investors will also focus on U.S. labour data due on Wednesday and non-farm payrolls numbers expected later this week for a guide to the normalisation timeline. Strong data prints could reinforce the Fed’s hawkish bias and further support the dollar, analysts at Maybank said.
Among Asian units, the Indonesian rupiah and the South Korean won each fell about 0.5%, with the rupiah touching its lowest in more than two weeks and the won weakening to its lowest level in nearly three months.
The Malaysian ringgit and the Philippine peso each weakened about 0.2%, but the Thai baht extended gains into a second session, adding 0.3% to hit a six-week high of 33.14 per dollar on the back of some portfolio inflows.
The gains came even as the Bank of Thailand (BoT) sounded more downbeat in minutes from its latest policy meeting, in which it warned of a larger and more prolonged impact than expected from the Omicron outbreak on economic recovery.
Meanwhile, data showed Thailand’s inflation rose by less than expected in December from a year earlier, and remained in the upper half of the BoT’s 1-3% target range.
Analysts at Australia and New Zealand Banking Group expect supply-side price pressures to likely keep inflation elevated in the near term, and see average inflation within BoT’s range in 2022 with a rate hike not materialising until 2023.
Among equities, Malaysian shares advanced up to 0.5% after a two-day losing streak, the Thai benchmark gained for a fifth straight day, jumping 0.3% to hit its highest since September 2019, and India’s Nifty 50 gained for a fourth straight day.
The Philippine bourse, which suspended trading on Tuesday due to a technical glitch, was down 0.5% in a thin-volume session, after climbing up to 1.3% earlier in the day.
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