The Thai baht rose sharply on Monday, leading strengthening Asian emerging currencies as the US dollar slid amid the fallout from the collapse of Silicon Valley Bank and hopes the US Federal Reserve may hike interest rates less aggressively.
The Thai baht strengthened as much as 1.6% to 34.43 per dollar, and was set to post its sharpest gain since March 1, while the Philippine peso and Malaysian ringitt appreciated 0.7% and 0.9%, respectively.
Equities in the region were largely mixed, with Singapore, Thailand, and Malaysia losing between 0.4% and 1%, while China’s Shanghai Composite Index advanced 0.7%.
The US administration on Sunday announced a series of emergency measures to shore up confidence in the banking system after the failure of Silicon Valley Bank (SVB) threatened to trigger a broader systemic crisis.
The new Bank Term Funding Program, which the Fed announced will make additional funding available, will be taken positively by risk markets, including in Asia and emerging economies, analysts at Morgan Stanley said.
Alvin Tan, head of Asia FX Strategy at RBC Capital Markets, said, “The risk aversion sparked by SVB situation has caused money to flow into treasuries.”
Meanwhile, the world’s largest economy is due to report inflation data on Tuesday, which will give further clues on the Fed’s likely stance on rate hikes, and will keep Asia currencies “very volatile”, added Tan.
Analysts at Maybank struck a contrary tone, forecasting bets on higher interest rate hikes would be back on once the dust settles on the SVB crisis and warning investors to be wary of the possibility of a rebound in the US dollar.
Southeast Asian FX weaker on uncertainty over US jobs data
Elsewhere in Southeast Asia, the Indonesian rupiah appreciated 0.5%. The country’s central is expected to hold its policy rate at its upcoming monetary policy meeting, according to a Reuters poll.
“While the Federal Reserve is likely to keep raising its policy rate, BI (Bank Indonesia) has been focused primarily on core inflation its post-pandemic normalisation cycle, in our view,” analysts at Barclays said, reiterating expectations of no more rate hikes this year.
Highlights:
** Indonesian 10-year benchmark yields are down 5.2 basis points at 6.91%
** Top gainers on Bursa Malaysia: Petronas Chemicals Group Bhd up 1.29%, IHH Healthcare Bhd up 1.19%
** Singapore’s 10-year benchmark yield is down 8.3 basis points at 3.151%