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Asian currencies fell on Tuesday, with Thailand’s baht and Indonesia’s rupiah leading losses, pressured by strength in the greenback as signs of economic resilience and a hawkish US Federal Reserve rhetoric pushed US bond yields to 16-year highs.

The baht depreciated as much as 0.8% by 0344 GMT, its lowest level since Nov. 10, 2022. The rupiah weakened as much as 0.4% to its lowest point in six months.

The yield on Thailand’s benchmark 10-year bond was at 3.26%, its highest level since May 2022.

Investor sentiment toward the baht is being pressured by continued fund outflows driven by wider rate differentials - the interest rate difference between two countries - and a recent uptick in oil prices that could fan inflationary pressures in the net importer.

Investors will now turn their focus to the Bank of Thailand’s policy decision on Wednesday, where the central bank is widely expected to leave its key policy rate unchanged at 2.25%, according to a Reuters poll of analysts.

Concerns around fiscal damage from higher spending by the country’s new government, which took office last month, to help finance fresh policies to stimulate the underperforming economy have also sapped investor confidence, according to Christopher Wong, an FX strategist with OCBC.

“To some extent, the following could be possible given some of the fiscal plans that are installed, but these fund outflows do not just pertain to Thailand, but across most of the region because of the higher-for-longer Fed (rate) narrative,” Wong added.

The US dollar index touched its highest since November at 106.1 after hawkish Federal Reserve rhetoric and a budget deficit to be financed by borrowing led the 10-year US Treasury yield up more than 45 basis points in September to top 4.5% for the first time since 2007.

Back in Asia, the South Korean won depreciated by 0.9% while the Malaysian ringgit and the Philippine peso weakened nearly 0.2%, each.

China’s yuan was largely flat after the central bank set the official guidance rate at its widest gap yet against market estimates, while offshore funding continued to be tight.

Stocks in emerging Asia were largely mixed, with those in Malaysia and Philippines advancing 0.2% and 1.2%, respectively. Shares in South Korea and China fell 1.3% and 0.3%, respectively.

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