The Thai baht and Malaysian ringgit led gains among emerging Asian currencies on Thursday, as the dollar slumped after the US Federal Reserve raised rates by an expected 50 basis points but struck a less hawkish tone regarding future rate hikes.
The baht surged 0.9% to eye its best session since October 2021, followed by the ringgit and Philippine peso , which advanced 0.4% and 0.1%, respectively.
The US dollar witnessed its sharpest fall in a month after the Fed said it was not actively considering 75-basis-point moves in the future, providing some respite to market participants.
“The baht rallied due to a few factors such as the risk-on sentiments from easing fears of the Fed’s aggressive rate hikes and some profits-taking activity on gold after bullion prices rebounded towards the $1900 zone,” said Poon Panichpibool, Markets strategist at Krung Thai Bank.
However, the COVID-19 outbreak in China and lingering concerns over new energy sanctions on Russia could thwart baht advances, he added.
Thailand also reported a slower-than-expected rise in headline inflation.
The 4.65% print in April was below expectations in a Reuters poll of 4.98%.
The core CPI index was up 2.0% from a year earlier, in line with forecasts.
“The headline inflation numbers came below expectations as the food prices did not rise as much as we thought. But we still continue to see inflationary pressures from oil prices which will continue to climb after the sanctions,” Panichpibool said.
Oil prices saw a renewed boom after the European Union proposed new sanctions against Russia that includes an embargo on crude for six months.
Asian stocks, FX cautious as investors await IMF debate for growth clues
Equities in the region were mixed as investors were relieved by the Fed’s stance on aggressive rate hikes, with China stocks climbing 1.1% to lead gains, followed by Philippines’ near 1% rise. However, stocks in Malaysia and Singapore fell.
Philippines saw its core inflation in April climb to the highest level since December 2018, increasing pressures on the central bank to tighten monetary policy.
“While inflation is still mostly supply driven, we think risks of an earlier hike by the Bangko Sentral ng Pilipinas (BSP) are increasing. We still expect its first rate hike in second half of 2022,” Barclays analysts said in a note.
Markets in Japan, Indonesia and South Korea were shut for public holidays.
Highlights:
** Indonesia’s annual economic growth likely held steady in Q1
** Thai headline inflation seen at 4% to 5% this year - Commerce ministry