Asian currencies: Thai baht falls to 1-week low on political turmoil

SINGAPORE: Most Asian currencies fell on Wednesday as a global bond sell-off rippled through the region, driving investors into dollar havens on concerns over government debt and economic growth, while regional equity markets remained choppy on widespread caution.

Suffering the steepest losses, Thailand’s baht weakened 0.34 percent to 32.450 per US dollar, its lowest in one-week, due to the country’s deepening political crisis.

The ruling Pheu Thai party moved to dissolve parliament and call snap elections, defying the largest parliamentary bloc’s attempt to form an alternative government.

The party pressed ahead with the dissolution bid despite losing Prime Minister Paetongtarn Shinawatra to a court ruling last week.

Among other currencies, Taiwan’s dollar and Indonesia’s rupiah retreated 0.2 percent, while the Malaysian ringgit, Singapore dollar, and the Indian rupee were little changed.

Meanwhile, Japan’s 30-year government bond yield hit an unprecedented 3.255percent, mirroring sharp increases in comparable UK gilts and US Treasuries that began overnight.

The slide in sterling and the yen in turn lifted the dollar, which last added 0.2 percent against a basket of currencies. The index gained 0.66 percent on Tuesday.

The global sell-off in long-dated sovereign debt underscores mounting investor concerns over ballooning government borrowing requirements driven by heavy fiscal spending that demands increased bond issuance to fund rising deficits.

Asian equities reflected broader market uncertainty, with Chinese and Philippine stocks leading declines of nearly 1percent as the bond rout weighed on sentiment.

Thai shares bucked the trend with a 0.5percent gain despite the country’s political turmoil, while South Korean and Taiwanese markets posted modest 0.2 percent advances, and Singapore fell 0.3percent.” Investors are a bit more cautious heading into a seasonally volatile period, according to Eugene Leow, Senior Rates Strategist at DBS. “The cross-asset performance is indicative of this behaviour with gold and the DXY (US dollar index) doing well amidst some shakiness in equities.”

Indonesian markets showed a mixed performance with the rupiah weakening 0.2 percent while equities gained 0.9 percent as investors monitored escalating civil unrest.

Police fired tear gas and rubber bullets at protesters, intensifying nationwide demonstrations that have killed 10 people since last week. The protests, initially sparked by opposition to high government spending, devolved into deadly rioting after police killed a motorcycle taxi driver in Jakarta.

“Indo assets have been vulnerable, as foreign investors may be reducing their exposure to the region, that they had built up in recent weeks and months,” said BNP Paribas EM Asia FX strategist Parisha Saimbi.

In Malaysia, the central bank is widely expected to hold rates steady at 2.75percent on Thursday and keep them there until at least 2027, according to a Reuters poll.