Most Asian currencies slipped on Wednesday, hurt by weak global market sentiment ahead of the minutes of the most recent US Federal Reserve meeting and inflation data, while South Korea’s won gained after the central bank delivered an expected hike.
The Korean won strengthened 0.5%, snapping a two-day losing streak, and was the only major Asian currency to gain sizeably for the day.
The Bank of Korea (BOK) raised interest rates by 50 basis points, a largely expected move, and flagged more hikes to come, in an attempt to boost the won to curtail import inflation.
The won has weakened nearly 17% against the US dollar so far in 2022, the most for any major Asian currency, behind only the Japanese yen which has lost more than 21%.
“A hawkish-leaning BOK may help blunt upward pressures on USDKRW but is unlikely to trigger a broader KRW recovery without easing in broader risk-off mood,” analysts at Maybank said.
Elsewhere in Asia, markets were lower, with the Malaysian ringgit and Philippine peso sinking about 0.3% and 0.2%, respectively, ahead of the Fed meeting minutes and producer price data due late in the Asia day.
Markets also await US September consumer inflation data due late on Thursday.
Headline inflation is expected to have eased slightly, according to a Reuters poll.
Broader market sentiment also further turned negative after the Bank of England (BoE) reiterated it would end support for the bond market on Friday.
“(Asian currencies) are reacting indirectly because is it having some impact on sentiment generally,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets, adding that the impact was still diluted.
“Coupled with the ongoing sell-off in chipmakers and the IMF downgrade of global growth forecast from 2.9% to 2.7% this year, risk appetite is unsurprisingly taking a beating,” analysts at OCBC said.
The BoE move alo further strengthened the dollar, which remains a source of pain for Asian currencies.
The dollar index rose 0.2% and was last seen at 113.439.
Asian bonds remained resilient despite a downbeat global debt market, with Singapore and Malaysia yields largely unchanged.
A Financial Times report saying the BoE had privately signalled to lenders it was prepared to extend its emergency bond-buying programme beyond its Friday deadline if market conditions demanded it boosted sterling on Wednesday, but Asian currencies saw no major moves.
The International Monetary Fund (IMF) also cut its outlook for global GDP growth to 2.7% for 2023, down from the 2.9% it had foreseen in July, due to inflation pressures.
Thai central bank meeting minutes showed it expects headline inflation to remain elevated throughout the year and the economy to return to pre-COVID levels by year-end.
The baht was trading 0.1% lower.
Equities in Asia were mixed, with markets in China losing 1.2% and those in Indonesia down 0.7%, while markets in India were 0.1% higher.
** Thailand consumer confidence at eight-month high in September, rises for fourth consecutive month
** Malaysia factory output beats market forecasts, rises 13.6% in August