Emerging Asian currencies broadly fell on Friday against a stronger dollar, buoyed by a hawkish US Federal Reserve, but the Philippine peso outperformed.
While central banks in Taiwan, Indonesia and the Philippines all increased interest rates on Thursday, the rupiah and the Taiwan dollar were down 0.1% and 0.2%, respectively, with only the peso managing to eke out gains.
China’s yuan fell 0.3% to its lowest in more than two years.
Bank Indonesia (BI) increased rates by more than expected on Thursday, Taiwan’s central bank hiked its policy rate for the third time this year and the Philippine central bank delivered its fifth rate rise of 2022, hiking half a percentage point, as widely expected.
Global risk appetite was sluggish after the US Federal Reserve delivered its third 75 bps rate hike this year, signalled further hikes and warned of dwindling confidence in the US economy’s soft landing.
The Fed’s projections for aggressive hikes have pushed US Treasury yields higher and triggered another round of dollar buying, driving the greenback to a near two-decade high and weighing on riskier Asian assets.
“The big macro factor that is driving markets right now is a strong dollar,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“And so, it doesn’t matter if there is some differential effect due to rate hikes…in the grand scheme of things, we are in a very macro dominated market right now, and it’s not really paying much heed to what’s happening with the domestic policies of individual countries,” Tan said.
Asian stocks were poised for the fourth consecutive weekly drop, with equities in Shanghai and Taiwan down 1.1%, while stocks in Seoul tumbled over 2%.
The Malaysian ringgit shed 0.1% on Friday and is down nearly 9% on the year.
Malaysia will not impose capital controls or peg the ringgit to the US dollar, the central bank said on Friday, as the currency trades near a 24-year low.
Malaysia’s consumer price index (CPI) rose 4.7% from a year earlier in August, in line with expectations, government data showed on Friday.
Meanwhile, the Indian rupee eased 0.5% to a record low, while shares in Mumbai fell 1.1%, on track for their second straight weekly loss.
The Reserve Bank of India likely sold dollars via state-run banks on Friday after the rupee extended losses to hit a record low, three traders told Reuters.
** Singapore’s key consumer price gauge rose 5.1% in August, slightly more than forecast, driven by larger increases in the prices of services and food, official data showed
** Indonesian 10-year benchmark yields are up 4.7 basis points at 7.275%