Most Asian currencies climbed on Friday, as a buoyant dollar took a breather with gains led by the Philippine peso, a day after the country’s central bank said it would match the Federal Reserve’s 75-basis-point rate hike to quell rising inflation.
The US dollar index, which eased 0.3%, still looked set to post its best week in over a month. The Thai baht and the Singapore dollar advanced 0.5% and 0.3%, respectively. The Chinese yuan edged 0.2% higher.
“Dollar continues to see modest upward pressures as markets digest the net hawkish messaging out of the Fed’s decision,” Maybank analysts said in a note.
The peso, which has tumbled 13% this year against the greenback and is Southeast Asia’s worst-performing currency, rose 0.6% after Bangko Sentral ng Pilipinas (BSP), on Thursday, said it will hike rates later this month in tandem with the Fed to maintain the interest rate differential.
“BSP’s pre-announced move was carried out to help steady the peso, which was expected to come under significant pressure due to the Fed 75bp rate hike. If BSP is successful in limiting peso weakness, it can help mitigate imported inflation to a modest extent,” said Nicholas Mapa, senior economist at ING.
Philippine inflation accelerated to its fastest pace in 14 years in October, backing expectations the central bank will keep tightening monetary policy.
“BSP rate hikes will hopefully re-anchor inflation expectations to help prevent runaway inflation but should supply side pressures persist, we expect so called second round effects to proliferate even in 2023,” Mapa added.
In Thailand, its central bank said on Thursday monetary policy will take into account the country’s economic growth, inflation rate, and financial stability.
The baht has fallen 11.5% so far this year against the dollar.
Asian currencies mixed in thin trading, Chinese yuan falls most
Regional stocks were on the back foot, after the Wall Street fell for a fourth straight session, as lingering concerns about the hawkish tone struck by the Fed on Wednesday weighed on market sentiments.
Equities in the Philippines and Indonesia fell 0.9% and 0.6%, respectively.
The Taiwan benchmark slid 0.3%
“Asian markets will tread lightly as investors will closely eye the non-farm payrolls report due later in the day for signs pointing to the notable impact the Fed’s rate hikes were beginning to have on slowing the economy,” OCBC analysts said.
Highlights:
** Indonesian 10-year benchmark yields rise 3.9 basis points to 7.474%
** Oil prices slid on fears US interest rates will go higher than previously expected and fresh concerns that COVID outbreaks will dent fuel demand in China
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