The Thai baht appreciated 1% on Friday ahead of a central bank meeting next week which is expected to see the tourism-reliant country at last join regional peers in policy tightening, while South Korea’s won also firmed 1% on strong inflows.
The US dollar index rose modestly in early trade after slipping more than half a percent overnight as investors awaited widely anticipated US jobs data amid growing worries of a recession.
Equities were largely mixed, with shares in Taiwan advancing nearly 2% on the back of top chipmaker TSMC while South Korea gained 0.9% and Malaysia slipped 0.5%. Shares in China were flat.
The baht strengthened as much as 0.9%, hitting a one-month high, with investors eyeing next Wednesday’s Bank of Thailand (BoT) meeting, which is widely expected to mark the beginning of its policy normalisation to stem soaring inflation.
Analysts at Australian lender ANZ and Barclays expect a 25 basis points (bps) hike by the BoT, with Barclays analysts seeing the need for the central bank to be more aggressive against the US dollar.
Tim Leelahaphan, analyst at Standard Chartered, who also expects a 25 bps hike, does not expect outsized rate increases from the BoT as it has “signalled gradual and data-dependent rate hikes”.
“We think the BoT will be comfortable with gradual policy normalisation if Thailand’s economy and tourism continue to recover, providing a buffer,” Leelahaphan said.
He added, however, that concerns remain over narrow policy space for the BoT to move, given growing recession fears and talk of rate cuts in the US next year.
Among other currencies, the Philippine peso appreciated 0.6% as pressure to tighten monetary policy persisted on the central bank on a strong inflation print for July.
Malaysian ringgit, Thai baht hit by safety flows, growth woes
Analysts at ING and Barclays expect a 50 bps hike from the Bangko Sentral ng Pilipinas (BSP) on Aug. 18, after an aggregate 125 bps hike since May.
“A more hawkish tone from BSP has helped steady the peso of late, but the currency remains vulnerable to depreciation as the Philippines now runs a current account deficit,” analysts at Dutch bank ING said in a note.
Indonesia’s rupiah also appreciated 0.2% as data showed economic growth in Southeast Asia’s biggest economy accelerated in the June quarter, boosted by an export boom. However, rising inflation and monetary tightening clouded the outlook.
Indian investors also eagerly await a central bank rates decision later in the day. A hike by the Reserve Bank of India is widely expected, with analysts’ estimates ranging from 25 bps to 50 bps.
Highlights:
** Indonesian 10-year benchmark yields falls 7.9 basis points to 7.136%
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** Strong earnings boost Japanese shares to nearly 2-month high
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