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Asian currencies were largely subdued on Thursday, while stocks moved slightly higher after getting battered a day earlier, as investors traded cautiously ahead of a widely-expected rate hike by the US Federal Reserve next week.

The Philippine peso and Indonesia’s rupiah inched up, while the South Korean won slipped to its lowest level since March 2009, as the greenback hovered near recent peaks on increased bets that the Fed’s aggressive tightening streak to curb sticky inflation is far from over.

Malaysia’s ringgit, which has declined over 8% this year against the dollar, fell yet again to levels not seen since January 1998 as widening policy divergence between the local central bank and the Fed weighs on the currency.

Stocks in Asia’ emerging markets were in a slightly better mood. Shares in Manila, Singapore and Taipei were up between 0.4% and 0.7%.

“After the heavy sell-off yesterday, Asian equities may possibly enjoy some mild technical rebound today on bargain hunting,” UOB Research said in a note.

In Indonesia, data showed the country recorded a $5.76 billion trade surplus in August, the biggest in four months and larger than expected, as exports and imports beat forecast.

Shares in Jakarta rose 1.3% to hit a record high of 7,371.589 points on Thursday. They have jumped nearly 12% this year, outperforming all the benchmark share indexes in emerging Asia.

The People’s Bank of China (PBoC) partially rolled over maturing medium-term policy loans while maintaining the interest rate as expected, with analysts noting a hawkish Fed was limiting China’s room for manoeuvre on monetary policy.

“With so much effort put into stabilizing the yuan , PBoC is not likely to undertake any measure that could widen the US-China interest rate differential in favour of the greenback,” analysts at Maybank said in a note.

China’s yuan slips but supported by firm fixings, pause in easing

Meanwhile, Chinese local authorities said Chengdu will lift a full COVID-19 lockdown in all districts still facing strict movement curbs as a recent outbreak comes under control.

The yuan, however, shrugged off the news out of Chengdu and dipped 0.1%.

On Wednesday, the yen rose more than 1% after the Bank of Japan conducted a rate check with banks in apparent preparation to step in to tame sharp yen falls.

But analysts said the move would give only provide brief support to the currency given the low chance of actual yen-buying intervention. The yen dipped 0.2% on Thursday.

Overnight, short-end US Treasury yields rose further after consumer price data on Tuesday failed to show inflation had peaked as expected.

Expectations now call for the Fed to hike rates by at least 75 basis points next week, with fed fund futures showing a 22% chance policymakers will raise rates by 100 bps when they meet on Sept. 20-21, according to the CME Fedwatch Tool.

Highlights

** S.Korea finmin: dollar/won rate rising rapidly, closely monitoring FX market

** Thai c.bank says no unusual capital movements as baht falls

** Indonesia govt, key parliament body set 2023 GDP growth target at 5.3%

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