Most Asian currencies fell on Wednesday, with Thailand’s baht and the Malaysian ringgit losing the most, as strength in the greenback continued to prevail after hawkish Federal Reserve rhetoric led US Treasury yields to scale multi-year highs.
The Thai baht weakened as much as 0.4% by 0311 GMT and the Malaysian ringgit by as much as 0.4%, the two currencies hitting their lowest levels since Nov. 10, 2022.
The baht, which has already lost more than 1% so far this week, has been pressured by capital outflows largely due to wider rate differentials - the interest rate difference between two countries - and the prospects of a higher import bill if international crude oil prices keep surging to new highs.
The uptick in oil prices, which have climbed nearly 9% so far this month, has led to increased concern over inflationary pressures in net importers such as Thailand and India.
The Indian rupee was largely flat in early trade, on track however to mark its worst quarter in three.
The rupee has been at risk of slipping to a record low against the dollar, but likely intervention from India’s central bank has kept it above an all-time low hit last October.
The Bank of Thailand’s policy decision is due later on Wednesday, and the central bank is widely expected to leave its key policy rate unchanged at 2.25%, according to a Reuters poll, although a few economists still expect one final hike.
Thai baht leads Asian currencies lower, pressured by dollar
A potential 25-basis-point hike could give some lift to the baht, said analysts at Maybank.
“However, any support the THB (baht) receives from the hike we believe is likely to just be temporary. External factors related to USD strength and ‘higher for longer’ Fed rates would still keep weighing on the currency,” the Maybank analysts said.
The US dollar index last stood at 106.20, having peaked at a 10-month high of 106.26 on Tuesday.
In Asia, the Singapore dollar and the Indonesian rupiah weakened 0.2% and 0.3%, respectively.
The yield on Indonesia’s benchmark 10-year bond was at 6.89%, the highest level since March 24.
Bucking the sombre mood, the Philippines peso appreciated as much as 0.4%, poised for its best session in more than a week.
Stocks in emerging Asia were largely mixed, with those in Malaysia and India retreating over 0.3%, each. While shares in the Philippines and Indonesia advanced 0.6% and 0.2%, respectively.