Asian emerging currencies were broadly weaker on Thursday as the dollar appreciated on fears of steeper rate hikes by the US Federal Reserve, with South Korea’s won leading losses after the country’s trade deficit widened to hit a record.
The Philippine peso and Malaysia’s ringgit fell 0.2% each, while Singapore’s dollar depreciated 0.3%.
South Korea’s won slipped 1.1% as the country’s export growth slowed in August but imports accelerated, thereby widening the trade deficit to a record amount and adding downside pressure on the currency.
Following the release of the trade data, Brian Tan, a senior regional economist at Barclays said he expected a 25-basis point (bps) rate hike each in October and November.
Bank of Korea, one of the first central banks to abandon pandemic-era monetary stimulus, raised its benchmark policy rate by 25 bps last month after delivering an unprecedented 50 bps hike in July.
The Thai baht depreciated 0.5%, a day after data showed its economy recovered at a slower pace in July as domestic demand and exports weakened.
However, Bank of Thailand - among the region’s least hawkish central banks - said a rebound in the vital tourism sector should continue to underpin economic activity.
India’s rupee fell 0.2%, following the country’s June quarter growth of 13.5%, its fastest pace in a year. However, economists said growth is likely to lose momentum in coming quarters as higher interest rates cool economic activity.
Last month, the Reserve Bank of India raised its key policy repo rate by 50 bps, while warning about the impact of a global slowdown on domestic growth prospects.
Most Asian FX rises; Thai baht, equities gain on growth view
“Despite the main drivers of domestic demand coming in line with our expectations, a large drawdown in inventories and statistical discrepancies came as a surprise,” analysts at Goldman Sachs wrote.
“In 2023, we expect growth momentum to decline as the full impact of tightening of financial conditions is realized amidst a global growth slow down.”
Among other Southeast Asian currencies, Indonesia’s rupiah fell 0.3% after the country’s inflation eased more than expected in August, but stayed above the central bank’s 2% to 4% target range.
The dollar index firmed 0.2% and weighed on the regions currencies. The greenback was near its two-decade peak hit on Monday.
The region’s stock markets were mixed, with the benchmark index of major energy exporter Malaysia declining 0.7% on the back of weak crude prices.
Equities in Seoul slid 1.9%, while stocks in Manila rose 0.2%.
** Indonesia lowers thresholds on palm oil export levies
** Technology giant Samsung Electronics and peer SK Hynix among top losers on South Korea’s benchmark index
** S.Korea revised Q2 GDP rises 0.7% q/q, in line with earlier estimate
The following table shows rates for Asian currencies against the dollar at 0347 GMT.