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The Philippine peso on Monday fell to its lowest in over three-and-a-half-years as the country’s central bank’s views on consecutive rate hikes this year fell short of expectations, while other Asian currencies traded mixed amid recession fears.

The peso led losses with its 0.5% drop that dragged the currency to its lowest since October 2018. Felipe Medalla, the incoming Bangko Sentral ng Pilipinas (BSP) governor, called for at least two rate hikes this year and left the door open for more increases if high inflation persisted.

The perceived dovishness of the BSP and policy dissonance with the US Federal Reserve are likely to have caused the peso’s weakness, Nicholas Mapa, a senior economist at ING, said.

The Philippines’ policy decision this week is also in focus amid projections that the country’s current account balance may see wider deficits in 2022 and 2023 than previously forecast.

The peso might still be weaker after the rate hikes “because of the bigger impact of higher price of oil on the import side,” Union Bank of the Philippines’ Chief Economist Ruben Carlo O. Asuncion said, adding that the growing trade deficit is going to continue putting downward pressure on the currency.

Other Asian currencies trimmed some of their earlier losses as the greenback softened, with the South Korean won down 0.4%.

Indonesia’s rupiah fell 0.1% ahead of a policy decision by its central bank later this week. Investors will look to whether Bank Indonesia maintains its policy rate or hikes it — as has been the case with most other regional central banks in a catch-up response to the Fed.

Asian FX slightly weaker on inflation, global growth worries

Meanwhile, China’s yuan stood out with a 0.5% gain after the country left its benchmark lending rates for corporate and household loans unchanged.

Emerging Asia stocks broadly fell as hawkish signalling from the Fed and central banks across Europe kept fears of a global recession at the forefront of investors’ mind.

“The market seems to be alternately calmed by commentary that the Fed will do whatever it takes to get inflation down, and panicking about what that might mean. So, this looks as if it will be another week with large swings in both directions,” Robert Carnell, an analyst with ING said in a note.

South Korea’s benchmark led losses with a 2% slump, and hitting its lowest levels since November 2020 during the session.

Shares in Kuala Lumpur fell 1.1%, touching their lowest levels in two years, as a near 7% drop in Malaysian palm oil futures weighed on the market.

Taiwan stocks dipped 1.8%, Thailand slipped 0.3%, while Jakarta reversed course to climb 0.3%.

Highlights:

** Garuda Indonesia’s proposed restructure of its more than $9 billion debt won approval of a majority of creditors, court officials said on Friday, staving off the risk of bankruptcy at the embattled flag carrier

** Indonesian 10-year benchmark yields are up 3 basis points at 7.496%

** Top losers on FTSE Bursa Malaysia Kl Index include Misc Bhd, down 3.3%, Top Glove Corporation , down 2.97%, and Press Metal Aluminium Holdings down 2.3%

** Singapore’s 10-year benchmark yield is down 2.3 basis points at 3.092%

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