Asian FX rises; Malaysian ringgit steady as cenbank hikes rates

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The Malaysian ringgit steadied after the country’s

central bank hiked interest rates for a third consecutive time on Thursday to

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tame inflation, while most Asian currencies rose in cautious trade ahead of a

speech by U.S. Federal Reserve Chair Jerome Powell.

The ringgit edged 0.1% higher after Bank Negara Malaysia (BNM) raised

cash rate by 25 basis points (bps) to 2.50%, in line with market expectations.

BNM stated that the future of monetary policy would be gradual and it would be

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measured to support economic growth.

“The decision has landed as expected. The accommodative stance suggests that

BNM would move for a 25 bps hike in their November meeting and not 50bps as some

expected,” said Qi Gao, FX strategist at Scotiabank.

The central bank projected the headline inflation to peak in third quarter

of this year before moderating, adding that volatility in forex markets was

likely to derail the country’s economy.

Currencies in the Asian region steadied for the day. The Indian rupee

and South Korea’s won advanced 0.2% each. Nevertheless,

bearish bets on them hit a record high due to a resurgent dollar and a weaker

yuan amid worsening COVID-19 lockdowns in China, a Reuters poll found.

Powell will participate in a discussion at a Cato Institute conference,

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where the rhetoric on rate hikes would remain hawkish overall.

The dollar is likely to strengthen further as interest rates are set to

rise, while resurgence in COVID-19 infections across China have pressured the

yuan, compounding misery on Asia’s emerging currencies reeling from widening

interest rate differentials and high inflation.

Speaking of interest rates, Indonesia’s central bank governor Perry Warjiyo

said last night the benchmark interest rate was set to rise further, but not to

expect policy tightening to be as aggressive as that of the U.S. Fed.

Equities in Asia rallied after tracking gains on the Wall Street as

benchmark U.S. Treasury yields eased, while oil prices steadied at levels not

seen since before Russia’s invasion of Ukraine.

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Equities in Singapore and Indonesia rose 0.9% each to lead

gains among its peers, followed by the Philippine stocks, which climbed

0.6%. Stocks in Malaysia and Thailand also advanced.

Oil prices settled below $90 – something only seen prior to Russia’s

invasion of Ukraine in late February – as downbeat trade data from top consumer

China fed investor worries about recession risks.

“More recent weakness in oil prices does increase the risk that we see some

form of intervention from OPEC+,” said Warren Patterson, head of commodities

strategy at ING.

“The group made it clear that further action could be taken if they felt it

was necessary, and the market is likely trading towards levels where they are

starting to get a bit uncomfortable, he added.

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HIGHLIGHTS:

** Indonesia’s benchmark 10-year yields climb 7.268% to their highest since

July 29

** Labour shortages set up Malaysia for third year of palm oil losses

** China debt restructuring policy under scrutiny as more countries demand

relief

Asia stock indexes and currencies at 0730 GMT

COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY % YTD % DAILY YTD %

%

Japan -0.10 -19.9 0.86 3.66

9

China +0.01 -8.75 -0.33 -11.10

India +0.19 -6.79 0.71 2.28

Indonesi +0.10 -4.36 0.87 10.15

a

Malaysia +0.09 -7.45 0.19 -4.68

Philippi -0.16 -10.6 0.61 -7.43

nes 8

S.Korea +0.25 -13.9 0.33 -19.93

0

Singapor -0.09 -4.01 0.87 -2.52

e

Taiwan +0.10 -10.3 1.20 -19.95

8

Thailand -0.01 -8.28 -0.05 -1.12

(Reporting by Tejaswi Marthi; Editing by Sherry Jacob-Phillips)